It’s absolutely crucial you ask yourself these 3 key questions prior to short selling dividend stocks. Short selling stocks is a method of taking advantage of decreasing share prices in order to realize a profit. In a nut shell shorting is betting against a given security.

A trader will borrow shares from a broker and sell the shares on the market hoping the security loses value, if the stock starts to decline in price the trader can purchase the shares and replace the borrowed stock.

So the net profit is the difference between the initial selling price and purchasing price of the stock to replace the borrowed shares, less any brokerage fees.

A simple formula could look something like this:

Borrowed stock selling price – Replacement value of borrowed shares – Trading fees = Profit.

For example- say a trader researched a tech company and felt that it was wildly overvalued, he/she could decide to borrow shares from their broker.

If the shares were trading at $15 and 100 shares were borrowed, the trader would immediatley sell the shares on the market and deposit $1500 dollars in their account.

Now the trader would wait (and hope) that the share price decreased. For arguments sake say the shares decreased to $7, the trader could purchase the 100 shares and replace the shares, or cover the short, borrowed from the broker. This would cost him $700. Additionally say the sale and purchase of the shares cost $50 dollars in trading fees the formula above would look like this:

$1500 – $700 – $50 = $750.

The trader would realize a profit of $750 dollars.

Lets use the same scenario above with respect to initial sale price and amount of borrowed shares, but instead of having the stock go down in price lets assume, for fun, that Microsoft fell in love with this tech company and wanted to acquire its technology thus offering to pay a hefty premium in order to buy the company, and the shares shot up to $45 dollars. The formula would look like this:

$1500 – $4500 – $50= -$3050.

The trader would suffer a loss of $3050 dollars.

In theory the losses in short selling can be huge and very risky because there is no telling how high a stock may go, while it is foreseeable to see how low a stock can plunge, $0. Many brokers require short selling traders to meet specific financial criteria in order to be given permission to short sell, additionally there are minimum levels of cash required to be allowed to short stocks.This is a very basic introduction to the complex and risky world of short selling; it is important to understand federal and provincial regulations regarding short selling and what is or is not permitted.

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Investing When You’re Older – Investing Strategies Change While You Age

Many elderly people do face challenges when it comes to investing their retirement money.They wonder whether to invest in a risky venture and earn more returns or to invest in a less risky venture which may have low profit.

For the people looking for safe stocks, I recently came across this amazing article that goes in depth on the best Canadian stocks you can buy today. I’ve purchased a few, such as Shopify and Fortis(from their dividend one, which is not the one it’s linked to)

From my experience, I am of the idea of retired people investing in a less risky venture.Below are some of the tips and facts to second my argument.

Tips For Investing When You’re Older

1. Have a plan and know the kind of venture you are investing in.

If you don’t have a plan, how will you know if you are on the right track? The process of creating a plan includes determining your current financial situation, how much money you want to save, and by when.

2. Diversify your investments.

Create a balanced portfolio to help you stay on the right track and reach your goals.

3. Beware of getting rich quick schemes.

If an investment seems too be good you should think twice as it might be not the case. Usually the higher the estimated return, the higher the risk to you. Stick with time-proven ways to grow your investments.

4. Feel comfortable with your investment decisions.

If the risk in your investments keeps you from sleeping at night, then it is not worthy for you to invest in. Keep records and check your statements each time you receive them.

5.Always question anything that doesn’t look right or that you don’t understand.

Read the Prospectus thoroughly before investing, do your research and understand how the fund works and all applicable expenses.

As we all know the more the risky the investment is the more the rate of returns.When we are young we intend to invest in a more risky venture for us to save enough money for retirement, to buy a house, to cater for the family as well as other many responsibilities.On another hand, as we got older, we have no much responsibilities to do.Therefore, when making investments at the old age we are more concern about stability and predictability of investment rather than the rate returns.Also when we reach retirement we no much time to analyse trends in the stock market.Most elder people get sick regularly so that it difficult for them to pay much attention to risky investments such as stock and treasury bills.

How Risky Is the Investment?

Every investment has a risk. There are no risk-free investments. Some investments are riskier than others, but every investment has a risk. There really is no such thing as a sure bet and anyone who tells you there is lying.

Investments should match your risk tolerance. You need to be clear about how much risk you are willing to take in your trading and investing. This is not an easy question to answer.

In general, people overestimate the amount of risk they are willing to face and underestimate the risks they are taking. Here are a few good rules of thumb:

As you grow older, take less risk.As your net worth increases, take less risk most people think to buy and hold strategies are the least risky strategy available. They are wrong. Buy and hold exposes investors to massive swings in the valuation of the stock market.

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