Investing Concepts!

Short Sale: I had trouble understanding what a short sale was but I found a great definition that helped me understand very well. What I understand a short sale to be is when an investor sees a stock that they believe is overpriced and looks to drop in the near future. The investor borrows said stock from someone who owns it already. They promise to return it at a later date and also generally there is a fee that comes along with borrowing the stock. After they have borrowed it the investor then sells the stock. They buy it back at a later date usually within a few hours after the stock has dropped. The profit is collected by the investor. The profit comes from selling the stock at a higher price than they buy it back for. It is then returned and you have made money hopefully!

Market Timing: I read about this in Money Sense magazine. It made me wonder what it would be like if you were to miss out on the really big days in the stock market. I found a cool little blurb on this on the site http://www.mathisen.ca/fyi.htm Basically it says that if you were invested in the S&P 500 over the past 16 years straight your return would be 14.51%. If you try to time your investing and missed 40 of the best days (which is only 1% of the total amount of days investing) your return would be around 5.63%. What I am gathering from this article is that you can never really predict whats going to happen, but we can make educated choices and guesses as to what may happen.

Hedge Funds: I also read about hedge funds in a magazine the other day, and wondered how I might get into one. It has been coined as the "mutual fund for the ultra rich" I thought to myself hmmm that would be nice. I dug a little bit deeper, and found out that hedging actually means to try and reduce risk. Hedge funds; however, try to maximize the return on the fund. They require very large initial investments, and are not very liquid as you have to keep the money in the fund for a year or more. Hedge funds are not regulated by the government, as to be involved in a hedge fund the investor usually has a good knowledge of investing.
Hopefully one day I can get into a hedge fund! Might be fun!