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Long-short Investing
Term category: Strategies
In 10 words or less: A strategy employed by hedge funds that involves buying some stocks and shorting others.

Definition: A strategy that involves buying shares of stock in one company while shorting another one.  Hedge funds often choose to buy shares in a company that is doing well while shorting its competitor who is doing the worst.

Advice: This strategy creates a situation where the fund has no exposure to the market (as long as shorts and longs are of equal size).  The fund profits if the stocks it buys increase in value more than its shorts.  As long as the fund's best stocks outperform its worst, it'll make money.

                    

 

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