High-Risk Investment Techniques Buying long Buying stocks expected to increase in value, which can then can be sold at a profit Selling short The process of selling stock that an investor does not actually own but has borrowed from a brokerage firm and will repay at a later date Assuming that the stock is overvalued and will soon decrease in price, the investor intends to repay the brokerage later with less costly stock, resulting in a profit for the investor Buying stock on margin Buying stock by borrowing part of the purchase price, usually from a stock brokerage firm Margin requirement—the portion of the price of a stock that cannot be borrowed; set by the Federal Reserve Board Copyright © Cengage Learning. All rights reserved

High-Risk Investment Techniques (cont’d) Other high-risk investments Stock options Commodities Precious metals Gemstones Coins Antiques and collectibles Copyright © Cengage Learning. All rights reserved