Short Selling
Short selling involves borrowing shares and selling them, hoping to buy them back cheaper later.
A short seller profits if the share price falls — they borrow shares, sell at the current price, then buy them back lower and return them to the lender. The difference, minus fees, is the profit.
Short selling is used both to speculate on falling prices and to hedge existing long positions. It carries theoretically unlimited loss risk if the price rises, which is why heavily shorted stocks can experience dramatic short squeezes when prices move against short sellers.
Retail investors rarely short individual stocks directly; instead they might use inverse ETFs or put options for similar directional exposure.
Example
If you short 100 shares at £50 and the price falls to £35, you buy them back for £3,500 and return them, keeping the £1,500 difference less borrowing fees.
Further Reading
Jack Bogle's case for low-cost index funds, in under 300 pages.
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Check Price →JL Collins' plain-English guide to index investing and financial independence.
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Recommended Reading & Tools
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Philip Fisher's growth-investing classic on evaluating management and moats.
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