In this podcast I explain why I never short sell. Ever.
Hint - one main reason is because you can in theory lose an infinite amount of money.
In this podcast, I also explain what margin is and why this negative leverage can compound short selling. Which makes it even more dangerous.
This might lead you to the question of… If short selling is so dangerous then why do some people do it?
I answer this in the podcast by relaying a story of famed investor Michael Burry from the movie The Big Short where he made A TON of money from short selling in the lead up to the Financial Crisis back in the 2006 time frame.
You’ll also learn why this almost ruined his hedge fund before the bet finally paid off though too.
If timing is off as an investor - and it almost always is because it's near impossible to time the market - you can lose A TON of money in the short term… Even if you’re proved to be right in the long term.
There’s a famous saying by economist John Maynard Keynes that says “The market can stay irrational longer than you can stay solvent.”
This plays out anytime someone short sells because of the negative leverage of margin and also the potential for infinite losses.
To learn more about why I NEVER short sell ever watch the video above.
Some of the other things we cover in this part of the Facebook Live are…
A real world example of a company I owned stock in purposely manipulating their stock price lower - for their own personal gain.
Why I view stock not as pieces of paper but as ownership in the entire company.
Why I only invest in something if I’m 100% comfortable in the risks I find while doing due diligence.
This doesn’t mean there are 0 risks… There are always risks. It means I’m comfortable with the risks I’ve found and the potential downside I see.
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• Basic Value Investing, Finance, And Investing Education Playlist go here - https://www.youtube.com/playlist?list=PLfmorMVSKq1c5QRIMjccoVBOuGkeKzKCY
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What’d you think of the topic above? Do you have any tips of your own you think I missed? Let me know in the comments below.
#investing #whyidontshortsell #whatisshortselling
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