How can investors hedge their stock investments?

How can investors hedge their stock investments?

Hedging is a strategy used to reduce potential losses by taking an offsetting position in a related asset. Investors hedge their stock investments to protect against market downturns while still staying invested.

Common Hedging Strategies:

  1. Put Options – Buying put options allows investors to sell a stock at a fixed price, limiting downside risk.
  2. Diversification – Spreading investments across sectors, asset classes, or geographies reduces risk.
  3. Gold & Bonds – Defensive assets like gold and government bonds tend to perform well when stocks decline.
  4. Short Selling – Selling borrowed shares can help offset losses in a falling market.

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