When Risk becomes more than return!

The primary aim of most hedge funds is to reduce volatility and risk while attempting to preserve capital and deliver positive returns under all market conditions.


Investors use hedging techniques to reduce their exposure to various risks. In financial markets hedging becomes more complicated than simply paying an insurance company a fee every year. Hedging against investment risk mean strategically using instruments in the market to offset of any adverse price movements. In other words, INVESTORS HEDGE ONE INVESTMENT BY MAKING ANOTHER.

Technically, to hedge you invest in two securities with negative correlations. Of course nothing is free, so you still have to pay for this type of insurance in one form or another.