September 26, 2022

World Trades

Finance Blog

What are the Advantages of Short Selling?

2 min read

Dealing with stocks is quite interesting. You can make a good profit out of small money is you really have a piece of good knowledge about the market. People often claim that dealing with stocks is quite risky but it is only true when you are investing without proper knowledge and studying the market. Now you may wonder what is short selling? This is when you trade stocks in a short period of time in order to make some profits. Below stated are some major advantages of short selling:

  • Safe Profits:

When you invest for a longer period of time and if the condition of the market worsens, then the value of your investment would go quite low. Even after investing your money for years, you may or may not be able to make good profits. On the other hand, if you invest in short selling, you can study the market accordingly and change your investments on a regular basis. Whether the market goes up or down, you can invest in both cases. In this way, short selling ensures that you can always make money out of your investment regardless of condition of the market.

  • Recession:

There is some unpredictable time when we experience a recession in the market and when the economy crashes down. This is the time when almost all the company shares are at their lowest price. This may be a bad time for others, but for the short-selling investors, this is one of the best times. Since the prices of these shares are quite low, they can purchase them in bulk and then sell as soon as market rises. This will result in a good profit and easy returns of the money from the stock market. 

  • Low Risk:

As discussed earlier, the risk involved in long term investment is quite high. There are high chances that their investment would go in the vein of that particular company faces loss. But on the other side, short selling investors are at a lower risk. They know to study the market well and then make an investment. The total comprises of small profits as well as small losses. On integrating all of these, the number of profits would be high and hence they would make a profit in a shorter time span. Hence, the lower risk is associated with short-selling.

  • Regular Profits:

In order to make a profit from a long term investment, you need to keep your money invested at a particular place for a long period of time. Most of the people may not feel patient about the same. The level of patience especially goes down when they are not able to see their money growing. For this, the best solution is to start regular investments and hence short sellings. In short sellings, you will be able to keep a practical account of your profits and losses and hence will be able to invest the money accordingly.