Cents and Sensibility


Saturday, November 17, 2001

Short position may not be
lostin company going bankrupt

QUESTION: If you hold a short position in a stock and the company goes bankrupt, do you lose your chance to profit from the stock price's drop?

ANSWER: In most instances, no. The bankruptcy of publicly traded companies can take from several months to several years to resolve. During this time, the stock would most likely continue to be traded, usually at a much lower price. In this situation, you'd be able to buy the shares and cover your short position.

Q: I'm a do-it-yourself investor. What benefits are to be gained by using an investment professional?

A: Not everyone needs an investment professional. Some people are quite comfortable making investment decisions on their own.

Others feel more comfortable seeking assistance from a professional. Here are a few things investment professionals can offer:

Knowledge -- Licensed investment professionals must pass a series of tests. Once licensed, they must regularly complete continuing education courses to ensure they are knowledgeable of current investments and rules that regulate their industry.

Resources -- Most investment professionals have access to tools unavailable to the typical investor. These tools may include up-to-the-second stock quotes, company opinions, company reports, hypothetical computations and more.

Discipline -- History has shown that the most successful investment plan is a long-term plan. Yet when short-term events are wreaking havoc on your long-term goals, it's sometimes hard to remain objective. A professional can help you maintain your investment course, even in choppy waters.

If you are interested in seeking the services of an investment professional, do your homework. Ask friends, neighbors and relatives for suggestions. Then make sure this person is qualified to handle your business. The most important investment decision you'll ever make just may be who will handle your investments.

Guy Steele is a financial planner and head
of the Pali Palms office of Edward Jones. Send
planning and investing questions to him at 970
N. Kalaheo Ave., Suite C-210, Kailua, HI, 96734,
or by email at:

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