Understanding Financial Safety Nets: What Is Hedging in Investments?

Amidst the recent sell-off, I think we're in a good position of tackling the complex topic of hedging—a strategy often misunderstood but crucial for managing investment risks. Hedging involves using various financial instruments or market strategies to offset potential losses in an investment. Essentially, it's like an insurance policy for your portfolio, but it doesn't eliminate all risks. Instead, it focuses on mitigating those you're most concerned about, allowing you to manage the risks you're willing to take to achieve potential returns.