What Does Hedging Mean?

A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment.

What is hedging in simple terms?

Hedging, in finance, is a risk management strategy. It deals with reducing or eliminating the risk of uncertainty. ... In simple terms, it is hedging one investment by investing in some other investment. Generally, when people plan to hedge, they try to ensure themselves against a negative event.

What is meant by hedging money?

Hedging against investment risk means strategically using financial instruments or market strategies to offset the risk of any adverse price movements. ... If the investment you are hedging against makes money, you have also usually reduced your potential profit.