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Why I Never Short Sell – Ever – Part 2
Today, we talk about why I never short sell ever. Also, why this negative leverage can compound short-selling. This is Part 2 of 2 on this topic.
As the markets continued to rise and meme stocks have continued skyrocketing too I’ve gotten more and more questions about short selling.
In a recent Facebook Live on the Value Investing Journey Facebook Group, I answered I never short sell in the video you see below.
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Let’s get to it
In the video, 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 the video, 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. If short selling is so dangerous then why do some people do it?
I answer this in the video by relaying the 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.
The big reason – timing.
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’ve 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 do I view stock not as pieces of paper but as ownership in the entire company?
- Why do 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
- And more…
To watch the full video make sure to check it out above.
Always in your service,
Jason Rivera
P.S. If you’re ready to learn how to become a great investor faster respond to this post in the comments and say I’m in and drop your email address and I’ll send you some more info.
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