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Trading and Investment Terminology

130-30 Strategy

This strategy is often used to improve returns on portfolio. It uses financial leverage by shorting poor performing stocks and purchasing shares that are expected to have high returns. A 130-30 ratio implies shorting stocks up to 30% of the portfolio value and then using the proceeds to take a long position in the stocks the investor thinks will outperform the market. Often, investors will mimic an index such as the S&P 500 when choosing stocks for this strategy.

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