Falling stock prices can destroy the net worth of investors, but there are ways to make a profit even in a bear market.

"Selling short" is a risky, but potentially rewarding way to benefit from a broad downturn in the market or the falling price of an individual stock.

"It's one of the few strategies you can use to make money while the markets are down," said Nadav Baum, managing director of investments at BPU Investment Group, Downtown. "It's a strategy used by hedge funds and institutional investors."

In a typical stock trade, investors want to buy low and sell high. When it comes to short selling stocks it's the concept in reverse. The investor borrows the shares from a broker and sells them, expecting they will decrease in value so that the investor can buy them back at a lower price and bank the difference. The short seller wins only if the stock declines in value. He loses if the stock price goes up. For example, if you borrow 1,000 shares and sell them for $8 per share, then a month or so later, purchase 1,000 shares at $7 per share you've made $1,000 (less commissions and other fees).

"Short selling is not something I'd advocate for anyone who is not a professional trader," said Michael Cohn, chief investment strategist for Atlantis Asset Management in New York. "I'd be more inclined to recommend shorting an index, as opposed to shorting individual stocks."

Mr. Cohn said he would be especially cautious of shorting the market now because he believes it's set for a rebound.

"We're in the process now of feeling out a bottom," Mr. Cohn said. "The majority of the benefit of shorting this market is over. The downturn in price for a lot of these stocks, especially financials, is 80 percent if not completely done."

Short selling is a far more difficult way to succeed in the stock market because in the long run stocks tend to rise.

While no one can accurately predict what the future direction of the market will be, its overall performance in recent months has been weak. As of last Friday, all three of the domestic stock market indices were at least 20 percent below their October 2007 all-time highs, which is the conventional definition of a bear market.

With the subprime and foreclosure wave still rolling in, gas and food prices soaring and a worldwide credit crunch still under way, there could be more stormy times ahead for this economy.

For investors who might be leery of shorting individual stocks, a bear market mutual fund or index fund might be a better choice.

Mike Martin, chief investment officer for Financial Advantage Inc. in Columbia, MD, said he manages money for many retirees who are in short positions, but he uses inverse funds that short many stocks at the same time, which spreads the risk.

"When the markets are expensive you've got to find a way to make money," Mr. Martin said. "You try to make money on weakness. You bet on the downside. It's not traditional. But these are not traditional times."

All that glitters is definitely not gold, though, in the realm of shorting stocks.

Andrew Stoltmann, a securities attorney for Stoltmann Law Offices in Chicago said he has litigated perhaps a half dozen cases where clients had substantial losses because of advice they were given by brokers and financial advisers to short stocks.

"The biggest problem is clients and financial advisers don't fully appreciate the fact that the losses are unlimited if the stock continues to skyrocket," said Mr. Stoltmann. "You can always buy the shares back, but the question is how bad the damage is going to be."

Timothy Sykes, author of "An American Hedge Fund," is among the small percentage of investors who have consistently made winning short stock sales. He claims short selling helped him turn $12,000 in Bar Mitzvah gift money into $2 million.

"It's considered a speculative strategy for a reason because in the long run stocks do tend to go higher," said Mr. Sykes, 27. "But on the other hand, more than 50 percent of stocks go down in a year regardless of what the market does. So it is a viable strategy in my mind.

"It's tough for the average person to disassociate themselves from a company and their products and bet the company will fail or under perform," he said. "It goes against our natural optimistic American thinking."

Mr. Sykes said some people consider it unpatriotic to sell stocks short because the investor is essentially rooting for others to screw up.

"But I've made millions of dollars doing this," he said, "and I think it's extremely patriotic to profit from business whether it succeeds or fails."

Investors can buy mutual funds and index funds that short stocks the same way they would buy any mutual fund or index fund. But in order to short individual stocks, he or she would need to open a margin trading account with a brokerage firm.

When the short sale is executed, the money from the stock sale is deposited into the investor's account, but they are not able to actually access it although it shows up as a credit. That money is escrowed as collateral until the investor executes a trade to buy back the shares and close out the trade. While the trade is open, the investor also earns no interest on the money in his account.

If there is a lack of supply and an excess demand for a traded stock, which forces the price upward, the broker can call back the shares at any time, forcing the investor to close the short position.

Also, when it comes to taxes, profits from short selling stocks are not eligible for the favorable long-term capital gains tax rates regardless of how long they hold the position.

"We do not recommend short selling for the average individual investor," said Mike Saghy, director of investments for PNC Wealth Management. "It's more about the timing of a trade rather than the underlying investment. It's a day-trading type of technique."

Mr. Saghy said he believes investors should have at least $1 million in investable assets to even think about shorting stocks.

"While we do advocate using the technique in a professionally managed portfolio, it is only recommended to exploit sector or industry opportunities rather than the risky nature of individual companies.

"From an individual prospective we don't recommend it because it's very labor intensive and technically ori ented, which is above the means or expertise of the average investor."