What Is A Hedge?
Hedging is often unfairly confused with hedge funds. Hedging, whether in your portfolio, your business or anywhere else, is about decreasing or transferring risk. Hedging is a valid strategy that can help protect your portfolio, home and business from uncertainty.
As with any risk/reward tradeoff, hedging results in lower returns than if you "bet the farm" on a volatile investment, but it also lowers the risk of losing your shirt. Many hedge funds, by contrast, take on the risk that people want to transfer away. By taking on this additional risk, they hope to benefit from the accompanying rewards.
Andrew Beattie can be contacted at ForexDictionary.com