This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
European stocks are set for their worst week since August. Time to panic, no? A gentle reminder that all good things CAN come to an end….. most definitely! Don’t assume stocks only go up.
Global equity markets have enjoyed an epic advance for many months, years even. However, twitchy fingers are eager to click ‘sell’ at the first sign of trouble, this confirmed by the VIX (Volatility Index) spiking through 14pts this week for the first time in six months. Notably, the VIX has increased by more than 40% in just a month – any coincidence that Goldman Sachs chose this week to warn its clients of a stock market correction being “highly probable” in the coming months?
Do remember that you can short-sell. Financially backing the market to fall, for speculative purposes, or as a hedge to your current exposure, is often overlooked by investors, usually because they don’t fully understand how it works. It is far simpler than you may realise.
An example – you have £10k invested in Vodafone shares, the market declines, the shares drop 20% in value, you’re down £2k on this position. If you open a £10k short-selling trade on Vodafone and the shares fall 20% you’d be running a profit of £2k which offsets the loss on your share position. Please, if nothing else, do read more about short selling – it really could save your bacon!
I want to be clear, I am not predicting a market fall. It could very well keep rising. I have no idea where it is going next. But I do want to inform you of your options, especially when the market is trading near record levels.
My final don’t is regarding crypto-currencies. I want you all to make your fortune but so little is really known or understood about these digital currencies and that it makes them super high risk. As I type Bitcoin, Ripple and Ether are down between 15-30% today, and whilst stocks can sometimes endure days like this, they’re seldom seen by comparison.
Please do click here to request more information on short selling.
Have a great weekend all.
Marc Kimsey, Trader, 2 Feb 2018
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