Posting my random questions has been working so well for me that I think I'm going to stick with it for awhile.
Tonight in class, I learned what hedging is (like when airlines buy hedges on jet fuel costs).
Here's my question: Does this use of the word "hedge" have anything to do with the "hedge funds" that are the topic of so many a Wall Street Journal article? What is a hedge fund?
Please note, I have entered "hedge fund" in Google and tried to come up with an explanation on my own. I didn't have much luck. I need an explanation in very basic terms.
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3 comments:
originally, yes, it did: the hedge fund was created by a guy named Jones (cna't remember his first name), and the idea was to sell short some stocks while buying others long (such as money markets or bonds), thereby hedging your risk.
nowadays a "hedge fund" has a less-specific definition, and refers (if i'm correct) to funds aimed primarily at being low-risk, high-growth. there's even a type of hedge fund called a 'fund of funds' which only invests in other hedge funds; it doesn't actually trade stocks at all.
... ... ... i'm a huge dork.
The way a friend of mine explained it (he who runs them) as if I was six years old: it's like betting against yourself. You buy some of stock A as well as stock B in case A doesn't perform the way you anticipate. Though I don't know you make money doing that.
I just had the astounding realization that it's not such a mystery if I just think about the secondary definition of the word "hedge."
Sometimes I really live up to the blondeness.
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