Hedging is a risk management strategy that involves taking an offsetting position to reduce potential losses. For example, buying put options on stocks you own protects you if prices fall. Holding gold or bonds in a stock portfolio acts as a hedge against stock market crashes. Hedging reduces potential gains but also limits potential losses.
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Market Navigator Glossary — plain-English definitions of 93+ investing and crypto terms. All content is for educational purposes only and does not constitute financial advice.