Is this trick enough to totally prevent bankrupcy in a case of a crash?
When you buy a stock, the worst case scenario is that it drops to 0.  Therefore, the most you can lose when buying a stock is 100% of your investment. When you short a stock, however, there's no limit on how high the stock can go.  If you short a stock at 10, and it goes up to 30, then you've lost 200% on your investment.  Therefore shorting stocks is riskier than buying stocks, since you can lose more than 100% of your investment when shorting. because the price might go up, but it will never be as big of a change as a regular price drop i suppose... That is not true.  Stocks can sometimes go up significantly (50-100% or more) in a very short amount of time on a positive news release (such as an earnings or a buyout announcement).  A famous example occurred in 2008, when Volkswagen stock quintupled (went up 400%) in less than 2 days on some corporate news: Porsche, for some reason, wants to control Volkswagen, and by building up its stake has driven up the price. Hedge funds, figuring the share price would fall as soon as Porsche got control and stopped buying, sold a lot of VW shares short. Then last weekend, Porsche disclosed that it owned 42.6 percent of the stock and had acquired options for another 31.5 percent. It said it wanted to go to 75 percent. The result: instant short-squeeze. The German state of Lower Saxony owns a 20 percent stake in VW, which it said it would not sell. That left precious few shares available for anyone else. The shorts scrambled to cover, and the price leaped from about €200, or about $265, to above €1,000. "Your strategy fails to control risk. Your ""inversed crash"" is called a rally. And These kind of things often turn into bigger rallies because of short squeezes, when all the people that are shorting a stock are forced to close their stock because of margin calls - its not that shorts ""scramble"" to close their position, the broker AUTOMATICALLY closes your short positions with market orders and you are stuck with the loss. So no, your ""trick"" is not enough. There are better ways to profit from a bearish outlook." Adding to the answers above, there is another source of risk: if one of the companies you are short receives a bid to be purchased by another company, the price will most probably rocket...
Unfortunately, the thieves don't have to be all that sophisticated to make the money unrecoverable.  What they typically do is open a phony bank account in the name of the victim.  They receive the refund into the fraudulent account, and they immediately withdraw it.  By the time anyone notices that the refund was fraudulent, the thief is long gone, and there is no money in the account to reclaim. It's not just the IRS who gets ripped off this way, by the way.  Thieves use a similar technique to cash stolen credit cards.  The thief will open a phony merchant account and a phony bank account in the victim's name.  They will run the stolen cards on the merchant account and deposit the proceeds in the phony account.  They are able to withdraw the funds before the fraudulent charges are noticed and reversed, and the processing company that the merchant account was opened with ends up eating the loss (or passing it along to their legitimate customers in the form of higher rates). Preventing this kind of fraud has costs.  There are monetary costs associated with putting antifraud measures in place, and there are costs to the customers in the form of having to wait longer for their financial transactions to go through.  Basically, everyone involved (the banks, the IRS, etc.) has to balance the losses against with the costs of preventing them.  When fraud is rare, it's cheaper for them to eat the loss than to prevent it.   If fraud starts to become more common you will see the institutions involved put into place additional checks to prevent improper transfers.  Tax return fraud has become common enough that the IRS has instituted prevention measures such as requiring information from previous year tax returns in order to receive your refund.  If that doesn't curb the problem, then they will probably add more measures, and perhaps they will slow down the payment process.  However, they probably won't ever get the fraud losses down to zero because that would mean both angering taxpayers by delaying refunds and spending more money on fraud prevention than they save in avoided losses. &gt; If a crook standing behind me in line seems me enter my pin  Easy to prevent with a cover over your fingers.  Hey! Do you mind giving your credit card to the waiter... who takes it to the back of the restaurant... gods knows what he does with YOUR credit card. writing down the number... scanning it... copying it... I am sure the waiter has a clean background... never ever ex-criminals get hired as waiters... high standards for waiters... and then the waiter give the card back to you so you can tip him? Don't forget to sign the receipt... so the waiter also have your most recent signature.  Or, do you prefer the card in your hand, while you scan it and then enter a PIN on a mobile device you hold in your hand?  How much fraud with ATM cards versus credit cards?  &gt; If he sees me sign my name he's less likely to do that.  We already determined that nobody even care about signatures or check them.  Have you EVER have a case that your signature was questioned? No? Well, try an experiment in the next week: always sign with a totally new and made-up signature. Then, let me know if even one transaction was rejected. "Being long the S&P Index ETF you can expect to make money. The index itself will never ""crash"" because the individual stocks in it are simply removed when they begin performing badly. This is not to say that the S&P Index won't lose 80% of its value in an instant (or over a few trading sessions if circuit breakers are considered), but even in the 2008 correction, the S&P still traded far above book value. With this in mind, you have to realize, that despite common sentiment, the indexes are hardly representative of ""the market"". They are just a derivative, and as you might be aware, derivatives can enable financial tricks far removed from reality. Regarding index funds, if a small group of people decide that 401k's are performing badly, then they will simply rebalance the components of the indexes with companies that are doing well. The headline will be ""S&P makes ANOTHER record high today"" So although panic selling can disrupt the order book, especially during periods of illiquidity, with the current structure ""the stock market"" being based off of three composite indexes, can never crash, because there will always exist a company that is not exposed to broad market fluctuations and will be performing better by fundamentals and share price. Similarly, you collect dividends from the index ETFs. You can also sell covered calls on your holdings. The CBOE has a chart through the 2008 crisis showing your theoretical profit and loss if you sold calls 2 standard deviations out of the money, at every monthly interval. If you are going to be holding an index ETF for a long time, then you shouldn't be concerned about its share price at all, since the returns would be pretty abysmal either way, but it should suffice for hedging inflation." "This is a comment, not an answer. -- but it needs saying and doesn't fit in the comment boxes. Owning is not always cheaper than renting.  Houses don't always appreciate, and in the early years of a loan you're mostly paying interest. -- so that too is ""lost money "". The time to buy a house is when you are reasonably sure you aren't going to move in the next five years or so, you need something a rental can't give you, you have at least 20% to put down so you avoid the pmi rip-off, you've run a full budget including upkeep and insurance costs and are sure you can carry the house worst-case ... including if you're out of work for an extended time...  (I've seen people lose a job and discover that they can't keep the house,  and can't unload it quickly.  Good route toward bankruptcy. Houses are not a liquid asset, and being ""house-rich, cash-poor"" is potentially dangerous. ) If you really hate apartments,  remember that sometimes you can rent houses too, often at lower cost per square foot. Basically, don't be stampeded into buying. I rented for two decades before I bought. And by/while doing so I was able to put aside enough investments that I could have bought a half-million-dollar house for cash, and was able to change cities several times without the stress of having to sell and re-buy. I missed out on the insane housing bubble,  but I also avoided being hit when that crashed." For insight on what will happen, I suggest looking at the situation from the lender's perspective: If your setbacks are temporary, and you are likely to get back on your feet again, they will protect their investment by making accommodations, and probably charging you extra fees along the way. If your financial hardship seems irredeemable, they probably try to squeeze you for as much as possible, and then eventually take your house, protecting their investment as best they can. If they are going to foreclose, they may be reluctant to do it quickly, as foreclosure is expensive, takes man power, and looks bad on their books.  So it may get pushed off for a Quarter, or a fiscal year. But if you are asking if they'll help you out from the goodness of their heart, well, a bank has no heart, and creditors are interested in ROI.  They'll take the easiest path to profit, or failing that, the path to minimum financial losses.   The personal consequences to you are not their concern. Once you realize this, it may change your thinking about your own situation.   If you think you have a path to financial recovery, then you need to make that clear to them, in writing, with details.  Make a business case that working with you is in their own best interests. If you cannot make such a case, recognize that they'll likely squeeze you for as much as possible in penalties, fees, interest payments, etc, before eventually foreclosing on you anyway.  Don't play that game. If your home is a lost cause financially, plan how to get out from it with the smallest losses possible.  Don't pay more than you need to, and don't throw good money after bad. Get a Bankrupsy lawyer. They'll tell you to stop paying the bills and use the money to pay their fee. Yes... You do need to pay in advance.   I can tell you honestly that it was the best thing that ever happened to me.   Think about it this way... When you loan someone moneyyou're placing a bet that they'll pay you back. You try to keep the dos in your favor by using credit ratings etc but sometimes you win and sometimes you lose that bet. It's nothing personal. It's business.   The casino doesn't feel bad when you lose your bets and your money and you don't expect them to. The person placing the bet knows what they're doing and knows all about the risks, etc. it's a calculated risk. Again... It's just business and it's nothing personal.   It's also not nesessairly a failure. Depending on the situation... Bankrupsy is an excellent business decision. Big business do it all the time.   Sometimes bankruptcy is a very smart decision and not going bankrupt is the worst decision you can make.   My only regret with my own bankruptcy is that I didn't do it sooner. I could have saved the family years of unnecessary hardship and I could have gotten it over with much sooner.   Don't be emotional. Be smart and do the smart thing. I agree. I have physical cash hidden in my house, a trick I learned from an elderly neighbor whose husband demanded they do it and it paid off for them twice. I have that and then will rely on credit if needed. My only question is if the statistic they mention is ALL savings or just what is in liquid assets. This is dumb on many levels.  First are they really trying to blame the Flash Crash for investors leaving the market. It's 2014 and they claim in 17 of 25 months since the 2010 crash investors have withdrawn (not really sure what this means either, since shares don't disappear- does this just mean the market is up? It's unclear). Either way the article quoted is from 2012! And for a research team creating an empirical model, this is a very scary usage of small sample size,  mistaking correlation for causation,  etc.  And the algo,  though they don't give much info,  seems to be the very essence of data mining. Pick a million signals and filter on those that are empirically the best.  If you are an individual investor or a small fund thinking of purchasing something like this,  first consider: if it really worked, why are the founders selling it when they could just use it themselves and profit from it? It's almost guaranteed not to work out of sample