Hedging is a very important concept in investing. As an individual, we all have to protect ourselves from external dangers in order to survive. For example, some women might carry a pepper spray with them in case some perverts try to attack them. The chances of being attacked is quite slim, but it becomes extremely useful in such case. In the example, the pepper spray is the “hedging” tool against the pervert. Life insurance is another example. You are “hedging” against the risk of death. Even if you die, at least the insurance will take care of your significant others or children financially. In the world of finance, such protections are called “hedge”.