How does "hedging" work in investing? (lemmy.world)

submitted 1 month ago* (last edited 1 month ago) by cheese_greater@lemmy.world to c/asklemmy@lemmy.world

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Someone turned 80k into like 1.2 million betting on Tesla calls or something and hedged with a Kamala win bet it was like 50k tesla/30k Kamala and they turned it into 1.2 million via Tesla somehow

Is it like

bet 1/2 on unlikely thing
bet 1/2 on likely thing
rely on gains on either side averaging out to at least ++

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[-] Nomad@infosec.pub 14 points 1 month ago

You bet on a company in a specific market and hope it goes up. Then you diversify another investment into this specific market, but in multiple companies. But you short them a little. First case, company go up, wins go up. Second case, major desaster tanks the whole market you equalize the dumping single company investment with the short in the market. Lost nearly nothing.

Hedging is about recognizing investment risk and mitigating it. That being said, hedging is not really a working strategy, it just has lots of media coverage. Hedge funds leverage a good story to convince investors to give them money to manage. They earn from managing that money without carrying three y risks. The broker always earns.

If you want you invest money with limited risk, broad market index funds area the way to go.

this post was submitted on 13 Nov 2024

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