In this era of low returns, the investment world’s best minds – of which there are so many due to the lure of big money – are figuring out how to crank out better results.
Since there is little to be made in picking the right investments to buy and hold, which is known as the long side of the investment equation, attention has been focused on the short side, or profiting from stocks and bonds that decline in value.
Making the Right Bet
Success in short investing means not owning securities, but rather betting correctly on which securities will go down in value, by how much and when. Traditionally, there are two ways to make such a bet.
One way is through selling the stock short. To do that, you borrow the stock from another market participant who owns it and then sell the shares. If the price of the stock goes down as planned, you buy the shares back at the lower price and return them to the original owner.