Hedging is a strategy created to reduce the incidence of unexpected business risks, in addition to the possibility of profiting from such investments.
Maybe some have not understood what is a hedge? A little more explanation as follows;
The easy understanding is like this: If you want to buy the latest mobile phone, and it has been a long time you dream, but as we all know that electronic gadgets like that is very large value shrinkage.
In other words, if you buy a new item at this time, for example the price is in the range of 600 dollars. Next year it could be that the price goes down very quickly.
It could be just about 500 dollars. Especially if the purchase is installment, it can even multiply its loss. Already the value of goods shrink, plus a large repayment interest.
Then, how can we have the stuff we love without losing its value? Here's how.We pair the goods with other goods whose value is almost certainly not going down like a precious metal or gold.
Buy the same gold with the Mobile we want, for example 18gr gold. Then the gold we pawned (usually can be 90% of the total value). By adding a little money, we can handpone that we want. Then we just pay the mortgage each month to redeem the gold.
That's roughly the simple sense of the hedge. Another meaning is, be wary if you want to buy goods in installments. Always calculate the value in the future.
If the value will certainly come down like a car, motorcycle, mobile phone, computer, and others, should not be purchased on credit or installments. Pay in stages (installments) goods or objects whose value is always rising, such as land, houses, precious metals.
Keywords for this article :
Understanding and examples of hedging | Types of hedging | Examples of hedging cases | Understanding of hedging in the economy | Understanding of hedging in accounting | Arbitrage sense | Hedge accounting | Assorted hedging