Hedge
Hedge is an investment strategy that seeks to reduce the risk of loss from price fluctuations in the market. It is a form of risk management that is used to protect against the potential losses that can be incurred from investing in stocks, bonds, commodities, and other financial instruments. Hedge funds are typically managed by professional investors who use a variety of strategies to reduce risk and maximize returns. These strategies include short selling, derivatives, and leverage.
History of Hedge
Hedge funds have been around since the early 1900s, when they were first used by wealthy investors to protect their portfolios from market volatility. The term “hedge” was first used in the 1920s to describe a strategy of buying and selling securities to offset potential losses. Since then, hedge funds have become increasingly popular with institutional investors, as they offer a way to diversify portfolios and reduce risk. Hedge funds are now used by a wide range of investors, from large corporations to individual investors.
Comparison Table
| Investment Strategy | Risk Reduction | Returns |
|---|---|---|
| Hedge | High | Moderate |
| Long-only | Low | High |
| Short-only | High | Low |
Summary
Hedge is an investment strategy that seeks to reduce the risk of loss from price fluctuations in the market. It is a form of risk management that is used to protect against the potential losses that can be incurred from investing in stocks, bonds, commodities, and other financial instruments. Hedge funds are typically managed by professional investors who use a variety of strategies to reduce risk and maximize returns. For more information about hedge funds, investors can visit websites such as Investopedia, Bloomberg, and Morningstar.
See Also
- Long-only
- Short-only
- Derivatives
- Leverage
- Portfolio Diversification
- Risk Management
- Investment Strategies
- Financial Instruments
- Stocks
- Bonds
