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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our investing reporters and editors focus on the points consumers care about most — how to get started, the best brokers, types of investment accounts, how to choose investments and more — so you can feel confident when investing your money. Investing disclosure: The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal. Bankrate logo Editorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Investors and traders often talk about “being long” or “going long” a stock, or they may say they’re “short” a stock or other investment. The lingo may be opaque, but the difference between these two terms couldn’t be more different, and it’s useful to know the distinction. Want to know the difference between the two? Here’s the long and the short of it! Going long vs going short
The distinction between going long and going short is brief but important: Being long a stock means that you own it and will profit if the stock rises. Being short a stock means that you have a negative position in the stock and will profit if the stock falls. Being long a stock is straightforward: You purchase shares in the company and you’re long. Sometimes people refer to shareholders in a company as “longs.” But the important point to remember is that if you’re long, you own the investment in question. Being short a stock is less straightforward, but it refers to those investors who short sell a stock in order to profit on its decline. Investors refer to those with such a position as “shorts.” The key thing to remember here is that when you’re short something, you have a negative position in it. The next section explains more about short selling and how it works. This distinction can become a bit more confusing when you go long , which profit when a stock declines. How short selling works
Going short, or , is a way to profit when a stock declines in price. While going long involves buying a stock and then selling later, going short reverses this order of events. A short seller borrows stock from a broker and sells that into the market. Later the investor expects to repurchase the stock at a lower price, pocketing the difference between the sell and buy prices. That is, while longs try to buy low and sell high, shorts try to sell high and buy low. To short a stock, you’ll need a margin account, which allows you to borrow money based on the equity you have in the account. And because you’re borrowing, you’ll have to pay interest on the loan. In addition, you’ll have to pay a (usually) small fee of a few percent annually to the broker that is called “the cost of borrow.” This fee pays for the broker to find and arrange the loanable stock. Finally, if you go short, you’ll owe any that are paid by the company. Because of all these difficulties in going short, short selling is usually best left to the pros. Investors who are looking for an easier way to go short often turn to options, and and with magnified returns if the stock goes your way. The pros and cons of going long and short
While they may sound like opposite strategies, taking a long or short position in a stock has some asymmetric payoffs and risks. Pros and cons of going long
Gives you an ownership stake in a business Can increase in value if the stock rises, but can lose money if the stock falls in price Losses are limited to whatever you invest in the stock Must have the money to buy the long position, No ongoing fees to own a stock Can receive cash dividends from a long position Pros and cons of going short
Doesn’t give you an ownership stake in the business Gives you a way to profit when a stock or market declines in value Losses are theoretically unlimited since a stock can keep rising Must have a margin account to go short Ongoing fees include margin interest expense and a stock’s cost of borrow Must pay any cash dividends paid by the short stock Bottom line
Once you know the jargon, it’s easy to understand what a long and short position are. And it’s a useful way for investors to quickly and succinctly say how they’re positioned in a given stock. Be sure to understand the potential risks of going long and short before you make any moves. SHARE: Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Related Articles