WHAT YOU NEED TO KNOW

A hedge funds are a money manager that invests the money of very rich investors. Due to their massive size of their funds, they can manipulate the market simply by moving their fund in the right way. One of these ways is shorting.

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A short, conceptually, is a way of investing wherein you first sell shares, then buy them back later. With this strategy, hedge funds hope that their shorted stocks go down in price so that the price they buy their stocks back at is lower than the price at which they were original sold. This kind of investment strategy is much riskier than your typical buy-and-sell strategy because, with a buy-and-sell strategy, the maximum amount of money you can lose is only what you put into the investment. However, with shorting, if you short a stock and it continues to grow in price forever, your losses will never stop increasing as the price to buy back your shares increases.

One of the hedge funds' favorite strategies is to short companies and then publish highly critical articles (often times fake news) to hurt the stock price and drive it down by convincing others to sell their shares as well. Then when the stock price plummets, they buy it back at the lower price and make a profit.

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Recently, hedge funds turned their sites to shorting GameStop, and that made some people very unhappy.