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Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on successful investing. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away.
Tip of the week: “Short sellers can make money in a hurry, but there are more losers than winners.”
There are lots of references in the financial media to “shorts”– those seeking to profit from stocks that fall in price. But this strategy comes with considerable risk.
When you decide to sell a stock short, you borrow that stock from a broker and then sell it. But you eventually have to buy the stock back on the market in order to return it to its owner.
If the stock falls in price while you are “short,” you can buy it back at a lower price. You have then made a profit. But if the stock rises in price, you’re obliged to buy it back at a higher price than you sold it, and you lose money.Don't miss your chance to download Pat McKeough's free report, "Stock Market Investing Strategy: Pat McKeough's Conservative Investing Guide for Making Money & Cutting Risk." In this report, Pat gives you simple, plain-English advice that can help you cut your portfolio's volatility — even in unpredictable markets like today's. Click here to download your copy and get started right away.
Short selling stocks can make you money twice as fast as simply buying stocks. That’s because stocks tend to fall about twice as fast as they rise. But many “shorts” wind up losing money, because short selling lacks these three key advantages of investing in stocks:
The advantages of buying a stock
Three big disadvantages of short selling stocks
Our investment advice: Above all, it’s important to remember that the odds in short selling are upside down. When you buy, your potential gain is unlimited, but all you can lose is 100%. When you sell short, your maximum gain is 100%, if the stock you short drops to zero. But a short-seller’s potential loss is unlimited, because there’s no telling how high a stock can go.
If you’re looking for stocks that suit the more aggressive portion of your portfolio—stocks that have the potential for gains of 50% or more in 6 months or less as well as providing income—you really should subscribe to Stock Pickers Digest.
The latest issue of Stock Pickers Digest gives you our full analysis, including clear buy/sell/hold advice, on 20 stocks that you can hold in that part of your portfolio you devote to aggressive investing. What’s more, you can save $50.00 off regular annual subscription rate as a new subscriber. Click here to learn how.Be the first to comment
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