Investment Vehicles

By: Macy Rodgers

Short Selling Stocks
Definition: when you sell shares that you don’t
actually own. Hedge funds use this type
because the fund can sell the stock when it’s
high, and buy it when it’s low.

Pros:

1. Could potentially have a large Cons:

return without putting much money
upfront
2. One of the few ways to make
money in a bear market
3. You can short the stock, and still
gain a little bit of the remaining
downturn money
1. Stock price needs to go
down to make money
2. It can take a normal stock
market dip and turn it into a
crash
Penny Stock
Definition: a common stock valued at less than one dollar. There is a potential to
make a quick profit which is why many use them, although they are very risky.

Pros:
Cons:
1. One can buy so much more
1. The majority are low- quality
with penny stocks because companies
rather than buying shares 2. Lies, Scams, Pump and Dumps
2. Not all are quick, but big 3. Risky markets
price moves can happen 4. Some brokers have higher
within days instead of years commission rates
Micro Cap Stocks
Definition: the stock of public companies which have a
market capitalization of roughly $50 million to $300 million.

Pro:

1. They have a significantly Cons:

higher growth potential
2. Financial institutions do not
push prices up too frequently
3. High probability of improper
pricing because of analysts
give little attention to the small
companies
1. Low liquidity
2. Very high risk
3. Time-consuming because
research is usually limited
because analysts do not focus
on them
Options
Definition: a benefit in the form of an option given by a company to an
employee to buy stock in the company at a discount or at a stated fixed
price.

Pros:
1. Additional compensation in
the form of discounted
stock purchases
2. Cheaper and easier for the
company to issue shares
than pay cash
3. Increase employee
motivation
Cons:
1. Values of the options or shares
decline when the company’s stock
decline
2. Can lead to substantial short-term
capital gains when a large number
of shares is purchased.
3. Can drastically increase
employee’s tax bill