Shorting versus selling to hedge risk
The point of short-selling as a separate instrument is that you can you do it when you can't sell the underlying asset... usually because you don't actually own any of it and in fact believe that it will go down. Shorting allows you to profit from a falling price. Another (non-speculative) possibility is that you don't have the underlying asset right now (and thus can't sell it) but will get it at a certain point in the future, e.g. because it's bonds that you've used to guarantee a loan... or grain that's still growing on your fields. If you already own shares in a company and sell some, you won't be short selling these shares if sold from the same brokerage account, because your existing shares with that broker need to be sold first before you are able to short sell any. If you own a portfolio of shares however, you may be able to short sell an index to hedge your current portfolio. Also, if you have your existing shares in a company but don't want to sell your existing shares, for example you don't want to crystallise a capital gain, you can always hedge you current shares by short selling them through a different broker.  Some other hedging options possibly available to you include: buying put options over the shares, writing cover call options, or short selling some other derivatives like CFDs (if your country allows them). The word 'hedge' emerges from early agriculture when farmers would ask the market for a minimum buy price for each crop they planted. They used this method to stop loss against any major losses.  Investors today use this strategy when they are unsure of what the market will do. A perfect hedge reduces your risk to nothing (except for the cost of the hedge). It's not quite identical, due to fees, stock rights, and reporting & tax obligations.  But the primary difference is that a person could have voting rights in a company while maintaining zero economic exposure to the company, sometimes known as empty voting. As an abstract matter, it's identical in that you reduce your financial exposure whether you sell your stock or short it.  So the essence of your question is fundamentally true.  But the details make it different.  Of course there are fee differences in how your broker will handle it, and also margin requirements for shorting.  Somebody playing games with overlapping features of ownership, sales, and purchases, may have tax and reporting obligations for straddles, wash sales, and related issues.  A straight sale is generally less complicated for tax reporting purposes, and a loss is more likely to be respected than someone playing games with sales and purchases. But the empty voting issue is an important difference.  You could buy stock with rights such as voting, engage in other behavior such as forwards, shorts, or options to negate your economic exposure to the stock, while maintaining the right to vote.  Of course in some cases this may have to be disclosed or may be covered by contract, and most people engaging in stock trades are unlikely to have meaningful voting power in a public company.  But the principle is still there. As explained in the article by Henry Hu and Bernie Black: Hedge funds have been especially creative in decoupling voting rights from economic ownership. Sometimes they hold more votes than economic ownership - a pattern we call empty voting. In an extreme situation, a vote holder can have a negative economic interest and, thus, an incentive to vote in ways that reduce the company's share price. Sometimes investors hold more economic ownership than votes, though often with morphable voting rights - the de facto ability to acquire the votes if needed. We call this situation hidden (morphable) ownership because the economic ownership and (de facto) voting ownership are often not disclosed.
"Don't put money in things that you don't understand. ETFs won't kill you, ignorance will. The leveraged ultra long/short ETFs hold swaps that are essentially bets on the daily performance of the market. There is no guarantee that they will perform as designed at all, and they frequently do not. IIRC, in most cases, you shouldn't even be holding these things overnight. There aren't any hidden fees, but derivative risk can wipe out portions of the portfolio, and since the main ""asset"" in an ultra long/short ETF are swaps, you're also subject to counterparty risk -- if the investment bank the fund made its bet with cannot meet it's obligation, you're  may lost alot of money. You need to read the prospectus carefully. The propectus re: strategy. The Fund seeks daily investment results, before fees and expenses, that correspond to twice the inverse (-2x) of the daily performance of the Index. The Fund does not seek to achieve its stated investment objective over a period of time greater than a single day. The prospectus re: risk. Because of daily rebalancing and the compounding of each day’s return over time, the return of the Fund for periods longer than a single day will be the result of each day’s returns compounded over the period, which will very likely differ from twice the inverse (-2x) of the return of the Index over the same period. A Fund will lose money if the Index performance is flat over time, and it is possible that the Fund will lose money over time even if the Index’s performance decreases, as a result of daily rebalancing, the Index’s volatility and the effects of compounding. See “Principal Risks” If you want to hedge your investments over a longer period of time, you should look at more traditional strategies, like options. If you don't have the money to make an option strategy work, you probably can't afford to speculate with leveraged ETFs either." Traditionally, dealers and broker-dealers were in contact with the actual producers of a product or issuers of a security, selling it at the exchange on their behalf.  Consumers would traditionally be on the buy side, of course. These days, anyone can enter the market on either side.  Even if you don't hold the security or product, you could sell it, and take on the risk of having to stock up on it by the delivery date in exchange for cash or other securities.  On the other side, if you can't hold the product or security you could still buy it, taking on the risk of having to dispose of it somehow by delivery in exchange for cash or other securities. In either case you (the sell-side) take on risk and provide products/securities/cash.  This is most commonly known as market making.  Modern literature coins the terms liquidity taker (buy-side) and liquidity provider (sell-side).  Even more accurately, risk management literature would use the terms risk-taker (sell-side) and risk spreader or risk reducer (buy side). This is quite illustrative in modern abstract markets.  Take a market that allows for no offsetting or hedging because the product in question is abstract or theoretical, e.g. weather trading, volatility trading, inflation trading, etc.  There's always one party trying to eliminate dependence on or correlation to the product (the risk reducer, buy-side) and the counterparty taking on their risk (sell-side). You can look the Vanguard funds up on their website and view a risk factor provided by Vanguard on a scale of 1 to 5.  Short term bond funds tend to get their lowest risk factor, long term bond funds and blended investments go up to about 3, some stock mutual funds are 4 and some are 5. Note that in 2008 Swenson himself had slightly different target percentages out here that break out the international stocks into emerging versus developed markets. So the average risk of this portfolio is 3.65 out of 5.  My guess would be that a typical twenty-something who expects to retire no earlier than 60 could take more risk, but I don't know your personal goals or circumstances. If you are looking to maximize return for a level of risk, look into Modern Portfolio Theory and the work of economist Harry Markowitz, who did extensive work on the topic of maximizing the return given a set risk tolerance.  More info on my question here.  This question provides some great book resources for learning as well. You can also check out a great comparison and contrast of different portfolio allocations here. You can employ a hedging strategy using short selling, put options, or other methods that will partially neutralize your exposure to the overall market.   e.g. You could short sell a market-wide index such as the S&P500, while going long (buying) the company you are interested in. Investopedia has a nice primer on this: Also, see this related question here: You can't make money on the way down if it was your money that bought the shares when the market was up.  When you sell short, borrowing lets you tap into the value without paying for it. That way, when the price (hopefully) drops you profit from the difference. In your example, if you hadn't paid the £20 in the first place, then you would actually be up £5. But since you started with £20, you still show loss. As others said, borrowing is the definition of selling short. It is also simply the only way the math works. Of course, there is a large risk you must assume to enjoy benefiting from something you do not own! In India the only way to short a stock is using F&O which I personally find to be sufficient for any shorting needs. However, Futures can be generally sold for upto 3 months but options have more choices which are even upto 5 years you can buy a put of a longer duration and when you want to do buy-back, you can directly sell the same option by squaring-off the trade before expiry date. You generally get approximately the same profit as shorting but you get to limit your risk. "How do option market makers actually hedge their positions so that they do not have a price risk? You cannot complete hedge away price risk of a sold call simply by buying the underlying and waiting.  As the price of the underlying decreases, the ""Delta"" (price risk) decreases, so as the underlying decreases, you would gradually sell some of the underlying to reduce your price risk from the underlying to match the price risk of the option. The opposite is true as well - as the price of the underlying increases, you'd buy more of the underlying to maintain a ""delta neutral"" position. If you want to employ this strategy, first you need to fully understand what ""delta"" is and how to calculate it.  Then you can use delta hedging to reduce your price risk." Any publicly traded financial instrument can be sold short, in theory.  There are, however, many regulations associated with short sales of US equities that may prevent certain stocks from being sold short at certain times or through certain brokers. Some examples: the most basic requirement (this isn't a regulation, it's just the definition of a short sale) is that you or your broker must have access to someone willing to loan you his/her shares.  If you are interested in shorting a security with few shares outstanding or low trade volume, there may simply not be enough people in the world willing to loan you theirs.  Alternatively, there may be a shareholder willing to loan shares, but your broker may not have a relationship with the clearing house that shareholder is using.  A larger/better/different broker might be able to help. threshold securities list - since 2005, each day certain securities are not allowed to be sold short based on their recent history of liquidity.  Basically, if a certain number of transactions in a security have not been correctly settled over the past few days, then the SEC has reason to believe that short sales (which require extra transactions) are at higher risk of falling through. circuit breaker a.k.a. alternative uptick - since 2011, during certain market conditions, exchanges are now required to reject short sales for certain securities in order to prevent market crashes/market abuse.