What is hedging in finance?

Hedging is a risk management strategy that involves taking an opposite position in a related asset or using financial instruments, such as derivatives, to offset the risk of price fluctuations in an investment or trade.

Why would I use hedging in my portfolio?

Hedging can help protect your portfolio from adverse price movements, reducing the impact of market volatility and ensuring more stable returns. It is especially useful in uncertain market conditions or when holding volatile assets.

Can hedging guarantee profits?

No, hedging does not guarantee profits; it only reduces the risk of significant losses. The cost of implementing a hedge, such as buying options, can also reduce overall returns, so it’s important to balance the costs with the level of protection needed.

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What is HEDGING?

HIGH-WATER MARK

High-Water Mark identifies the highest portfolio value before a drawdown.

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