I am sure you have heard of short and long, and no I don't mean the terms of measurement or during the backyard football games. I'm referring to the terms used regarding stocks and investing. But what exactly do they mean, and what the heck is going on with investment news and now mainstream news?
The average investor typically buys and hold stocks in a portfolio. The holding of stocks over an extended period is known as a "long" position. That is easy to understand and that is how most of us treat our portfolio. On the other side, the day traders typically buy and sell funds days, hours, and sometimes minutes after the purchase to chase gains. This is a risky undertaking and not what you want to do with your retirement nest egg. If most of us long the market, what is shorting?
The Term "short" when it comes to stocks means to borrows shares and immediately sell them, hoping to scoop them up later at a lower price. This is used by investors and hedge funds when they think a company is on the decline. This position is basically a bet against the company's stocks going up. This can work both ways, and fortunes have been made and lost doing this. This is not something our money managers at SMRT Planning practice. So why am I bringing it up?
I bring this up because the internet can influence a lot of things, and one of those things is the stock market. By banding investors together to drive the price of a stock up for a company, they can drive anyone who was "shorting" that stock to lose a lot of money. This shows the power of social media and message boards, which has been used to band investors together to make this happen,
This brings a whole new level of instability to investing. We do not know what company or what sector will be the next target, and that leads to a lot of uncertainty. Will your retirement nest egg crack if you have one of the companies targeted in your portfolio? Safe money planning can help protect your nest egg.