What is 130-30 Strategy?
The name itself offers a clue to how this strategy works. The “130” refers to a 130% weighting in long positions within your portfolio. These are stocks you believe will outperform the market and increase in value over time. The “30” represents the portion of your portfolio dedicated to short selling. Here, you’re essentially betting against certain stocks, anticipating their price to fall.
Let’s understand with an example: Suppose you have a starting portfolio of $100,000. Using the 130-30 strategy, you might allocate $130,000 to long positions in companies you’re bullish on. This additional 30% typically comes from borrowing money from a broker.
It’s important to remember that the 130-30 strategy doesn’t actually increase the overall value of your portfolio beyond the initial $100,000. Instead, it aims to magnify your returns by leveraging your long positions and potentially profiting from short selling. While typically used by institutional investors, the basic concept of the 130-30 strategy can be grasped by individual investors as well. However, as with any investment approach, there are complexities involved.
130-30 Investment Strategy: Guide 2024
Ever wished you could profit not just from winning stocks, but also from those you believe are headed for a fall? The 130-30 strategy is an investment approach designed to do just that, by combining traditional long positions with strategic short selling. It allows you to potentially profit from both rising and falling stock prices, giving your portfolio a chance for growth.
Table of Content
- What is 130-30 Strategy?
- How does the 130-30 Strategy Work?
- Benefits of the 130-30 Strategy
- Risks of the 130-30 Strategy
- Is the 130-30 Strategy Right for You?
- Conclusion
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