Is it time to bet against the stock market?

March 8, 2026 — 5:00am

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When we think of investing, we typically think of numbers going up. Compound interest, return on investment – all these things are (usually) reliant on balances getting higher, rather than lower. In fact, numbers going down is, by and large, no good when it comes to making money.

But there are some cases where investments losing money can be a good thing. The most common is short selling, where investors seek to profit from markets declining by borrowing an asset from a lender, selling it on the open market, and then repurchasing it later at a lower price to return to the lender.

However, outside of movies like The Big Short, you rarely see or hear about investors making short bets. That’s not to say it doesn’t happen, but it’s the sort of financial manoeuvre generally left to big hedge funds and the like, who have the capital to make profits off even small changes in the market.

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That’s not to say everyday investors can’t try making these trades too. Take Liberal MP Tim Wilson, for example, who in February 2020 bought into a leveraged ETF that profits when the ASX 200 falls. A spokesperson for Wilson told The Guardian he “bought these shares as a hedge during COVID, but has kept them because of the poor economic policies of the Albanese government”.

Unfortunately for Wilson, the ASX has risen around 24 per cent since, meaning the investment has fallen more than 75 per cent. Despite this, he claimed on Wednesday he had made a “modest profit” from selling out of the investment, which he has donated to charity.

What you can do about it

Since the US and Israel’s strikes on Iran, global markets have taken a bit of a tumble, leading to some warnings that we could be in for a serious downturn. So, could it be time to make a short bet?

Should everyday investors short? There’s an adage often referred to in investing circles – “time in the market” not “timing the market”. Unfortunately, shorting is the very epitome of trying to time the market, something that even the best investors often get wrong. For this reason, shorting is something the majority of everyday investors should steer clear of. Jason Todd, founder and CIO at TenCap, says it’s not a “particularly sensible strategy” for investors with a long-term view. He says this is because betting against the market requires you to have a strategy of when to exit your short investment and get back in, as most shorts aren’t designed to be held long term. “Everyone wants to be a hero and claim they called a downturn. But very few can get the timing right,” Todd says. “Talking about downside risks is easy but understanding when they matter and when to position is very different.”

How long should you short for? Unlike Wilson’s five-year venture, short positions aren’t supposed to be long-term investments. There are a few reasons for this. Firstly, markets tend to trend upwards over time, even after major crashes and corrections – for example, since 2008, the ASX has more than doubled in value – which makes shorts good when crashes happen, but bad when the market starts to recover. Additionally, when you buy a share, your losses are limited to 100 per cent of the money you invested. But when you short a share, your losses can be theoretically limitless if prices keep going up rather than down, meaning it’s best to close out the investment before that happens. “For a short position, you want to have an identifiable catalyst to realise the value of the bet. Otherwise, you are taking a position on a narrative but with no driver to crystallise the position’s value,” Todd says. If you do decide to try shorting, like any risky investment, it should make up only a small part of your portfolio.

How else can you “bet against” the market? If you’ve decided shorting isn’t for you (which, let’s be real, is probably a good move), thankfully there are some other more sensible ways to position your portfolio to prepare for a market slump. First off are classic hedges such as gold, silver or bonds, which all tend to fall less during market corrections compared to equities. Favouring shorter-term investments can also be a strategy if you’re concerned about a dip, says Chad Padowitz, co-CIO at Talaria. “We think it prudent to favour short-duration investments, real assets (such as gold or utilities, etc), companies with strong balance sheets that are more flexible and are better positioned to manage volatility​, and portfolios that draw from uncorrelated sources of return,” he says. Additionally, rebalancing your portfolio away from growth stocks to more staid, stable stocks with higher yields (dividends) can also help you reduce your losses if things do go sideways.

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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