You already know how to make money in the market. You buy low and sell high. What if you did that in reverse order? That is, you sell high, and then you buy low. What is that called? Yes. It’s called making money in the market, but I am looking for the term that this way of making money is called.
When you buy first that is called being long the stock. And when you sell first that is called being short the stock. So selling first and then buying second is called shorting the stock or just “going short”.
Is this bad? No. Is it risky? Yes. What is the risk? The risk is that the security that you sell could go up in price and when you bought it to complete the transaction, you would be buying high.
Only people who are really savvy in the market sell short. That is why I thought it was interesting when I read in the financial press the other day that the world’s biggest bond fund manager was shorting US Treasurys.
What does that mean? PIMCO Total Return, the bond fund, thinks that the US Treasurys are going to go down in price. So they are selling now and hope to buy back when the US Treasurys are a lot lower.
Like I have said over and over the past few months, if you own Treasurys, consider selling now, while you can or sell later after the price goes down and you lose money.
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For Taking Early Retirement (TER), I hope you are enjoying a great retirement or are close to that day!
Jeremiah John
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