Long-short funds: Recipe for consistent returns in equities

A long short combination strategy tries to avoid market risk to a great extent, thereby reducing the volatility in returns.

Vaibhav Sanghavi

Ambit Investment Advisors

Long short funds / strategies is an investment methodology across assets which seeks to profit from asset prices gain or declines. As we dig deeper into the subject matter, let me first explain what do long and short strategies mean in normal understanding. Investors in normal course of equity investments buy equity share of a company, hold it according to their objective and expect to sell them at a profit at higher levels, thereby making returns. This strategy is a long only investment strategy. Whereas, short strategy, is exactly reverse of the above. Whereby, an investor would sell equity shares of a company to be bought back later at lower levels thereby making returns by decline in share prices. The return here is result of a short strategy.

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