How to Short Sell the Japanese Stock Market

One of the best investment strategies of 2008 was short selling the Japanese stock market. Here's how to make money investing in the economic downturn of Japan.

Things You'll Need

• A brokerage account

Instructions

1. 

   Before you do any trading, investing, or short selling of the Japanese stock market, you need to set up a brokerage account, one that will allow you to set up short sell orders. Brokerage accounts can be set up easily online, and many have great special offers, such as cheap trades.

2. 

   The easiest way to short sell the Japanese stock market is to pick a large company you believe will lose value on Japan's top economic index, the Nikkei, and place a short sell order on it. You can also place a short sell order on a fund that tracts the entire index, or invest in a managed mutual fund that focuses on short selling targeted funds in the Japanese stock market. Mutual funds that followed this strategy were the among top earning mutual funds in 2008.

3. 

   If you want to understand how long to hold onto these investments, you need to understand why they made money in the past. The reason why short selling the Japanese stock market was so profitable in 2008 is because of the overall economic downturn. Japan's economy, which is largely based on expensive exports, couldn't count on the rest of the world buying their items and so they suffered a massive loss. If the economy continues to get worse, the Japanese stock market is likely to lead the downturn.

Tips & Warnings

• Never invest more money than you can afford to lose. There are no certain winners in the stock market

• The Yen Japanese currency is not likely to suffer as much as the overall stock market in Japan in a downturn because of deflation, so currency trading in the Yen may not be the best strategy.

Resources

• When to Invest in Gold
• Penny Stock Investing