What is Hedge? And how to choose the right hedge for your portfolio?

Hedge in real world scenario is a structure built for protection. Investing your money is like jumping of the cliff without knowing what’s under the cliff. And hedge in the financial world is the rope you tie to a strong structure such as a tree that protects you from falling off and dying. With a hedge in its place you can control how far down you can go. Similarly with the right hedge you can control uneven markets and protect your investment from shattering. But, how do you identify a certain investment as an hedge. And what is a good hedge and a bad hedge?

Good And Bad HEDGE?

A hedge investment can be considered good if it can provide stability to your portfolio without lowering your net ROI(return on investment) by swift points. The change in net ROI should be minimal only then a hedge can be considered as Good. That’s the sole reason why Gold is considered one of the worst hedge in the market. If your net ROI is around 15% and you add Gold to it considering a 50% hedge your net ROI will decrease by remarkable 4-5%. There are lot of alternate investment options real estate being the most popular. If you really want to buy commodity for hedge look beyond Gold.

When you are searching for a hedge investment you should always look for how valuable that thing is to people and humanity. Take example of silver its’ demand keeps increasing its usage keeps increasing. Steel, CrudeOil, these are some of the commodities that are crucial to modern world and have limited supply. But, don’t let your mind limited to commodities think beyond. There are zillions alternate investment options that can act as good hedge. One such hedge is of course 12% Club

How to Choose the Perfect hedge?

When you are searching for a hedge investment think of a market crash situation. And assess your options that can help you stop the money loss in this crash. What are the options that will outgrow the market crash? For example when you look for a hedge before jumping of a cliff in real world. You look for the tree with the strongest roots. Similarly, look for investment options that have the most impact on modern world. If I could buy internet that would be the greatest hedge for the decade. But, sadly you have to be a multi billionaire to buy internet. My best bet is alternate loan apps, property share applications that allow partial ownership of real estate, silver, platinum, and hybrid mutual funds. Let me know what you choose as your hedge in the comments. One more important point a hedge is also comes with an expiry. For example, 10 years ago gold was one of the greatest hedge but today its waste. So, keep that in mind.

manorinfinity Written by:

Complex Problem Solver, Outloud Thinker, An Outstanding Writer, and a very curious human being

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