Hedging

Hedging is an investment strategy that aims to reduce risk by taking an offsetting position in another asset. So if one investment has a sudden price change, hedging may help to lessen the impact. A hedge fund might use derivatives to offset potential losses in stocks. Or if an investor holds stocks and thinks there may be a market downturn ahead, they might use hedging techniques, such as options or futures, to minimise their potential losses. The goal of hedging is to achieve stable returns, regardless of share market or economic conditions. While hedging can provide a safety net, it can be complex and costly.