What does the phrase "hedging your bets" mean?

Answer

The phrase "hedging your bets" refers to minimizing exposure to loss in the event that the position taken turns out to be wrong. Bookmakers make a practice of doing this when taking action on games. They set a line to keep bets on both sides of a game as even as possible, which is why bets on a football game give points to one side or the other. When action gets too heavy on one side, they lay some of those bets off to other bookmakers who are unbalanced on the other side.

There are other meanings to the phrase "hedging your bets" besides those associated with gambling. When putting an investment portfolio together, money managers often combine risky investments, such as less established stocks and more aggressive mutual funds, with more conservative instruments, such as certificates of deposit or government bonds. This means that investment income has less risk because of the combination of instruments. Investors who put all of their funds into risky ventures have the potential for higher returns as well as higher losses. Basically, any situation in which people attempt to put safeguards in place so that they benefit no matter how a situation turns out is one in which they are hedging their bets.

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