A hedge is an investment2 to stability out an investment1, so that you're literally not uncovered to the prospect in investment1. operating example, you're a gold mine. the cost of gold is risky, and also you want to concentration your interest on mining gold, not observing the gold cost. so that you hedge your production of gold, by using promoting ahead in paper trades. (I.e. you ought to frequently not provide the actual gold you've bought.) So now you're certain what your earnings will be in the destiny, for each ounce you bought. Then as you actual produce the gold, you enter into actual sales, and concurrently a paper purchase. in this kind your purchase and sale leaves you internet interior of a similar position. You "cancel" the paper purchase and sale, and provide the gold to the actual settlement. that's in extremely simple words, what a hedge is. A Hedge fund is a fund that invests in those kinds of paper contracts, because they are prepared to settle for and take care of the (cost) possibility, even as leaving the mines to spotlight what they are ideal at. There are a great type of money, with diverse recommendations. they don't look inherently risky money, yet because those contracts must be pretty leveraged, the skill for giant salary is equalled by using the skill for giant losses. in the adventure that they don't look precise *hedged* themselves.