When markets are trending up it is easy to make many. It is when the markets are sliding down that the problem arises. Karan Bhojwani explains in detail how to optimally profit from falling markets!!
One of the primary reasons individuals put their money into the stock market is because over time stocks tend to rise and provide a decent measure of returns for the investors. So the rule, ‘Buy Right: Sit Tight’, is often quoted by numerous successful financial specialists. 'Buy right' implies purchasing quality stocks at a sensible price, while 'sit tight' means holding the stock for a reasonable period of time to realise the full growth potential of the stock. But the journey of wealth creation is not always a joyful ride, as the market is subject to downswings. There are some individual stocks which, notwithstanding the rise in the market, continue to languish due to various reasons such as terrible management, poor business prospects, increase in competition, new regulations which are not favourable for the company, and many other factors. These are the stocks most financial specialists attempt to stay away from. Be that as it may, how does one make profit when an individual has reason to believe that a stock or the market will be heading downward? One can make profit from the concept called 'short selling' or 'shorting', wherein they can gain from a decline in the price of the stock.
WHAT IS SHORT SELLING?
Every investor understands the traditional approach to making profit in the stock markets. You purchase a stock today, then sit tight and wait for the price to go higher than the cost price you have paid, and when the price goes up, sell the stock for a profit. This is known as going “long” the stock. Quite simple and direct.
This story is from the December 10, 2017 edition of Dalal Street Investment Journal.
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This story is from the December 10, 2017 edition of Dalal Street Investment Journal.
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