I always complain the Google Translate can’t provide actual translations. I read a piece like the following, but got all crappy translations. Don’t believe it? Please try it by yourselves. Copy and paste the English paragraph to the Google Translate to see what you get:
Although it sounds like your neighbor’s hobby who’s obsessed with his topiary garden full of tall bushes shaped like giraffes and dinosaurs, hedging is a practice every investor should know about. There is no arguing that portfolio protection is often just as important as portfolio appreciation. Like your neighbor’s obsession, however, hedging is talked about more than it is explained, making it seem as though it belongs only to the most esoteric financial realms. Well, even if you are a beginner, you can learn what hedging is, how it works and what hedging techniques investors and companies use to protect themselves.
What Is Hedging?
The best way to understand hedging is to think of it as insurance. When people decide to hedge, they are insuring themselves against a negative event. This doesn’t prevent a negative event from happening, but if it does happen and you’re properly hedged, the impact of the event is reduced. So, hedging occurs almost everywhere, and we see it everyday. For example, if you buy house insurance, you are hedging yourself against fires, break-ins or other unforeseen disasters.
Portfolio managers, individual investors and corporations use hedging techniques to reduce their exposure to various risks. In financial markets, however, hedging becomes more complicated than simply paying an insurance company a fee every year. Hedging against investment risk means strategically using instruments in the market to offset the risk of any adverse price movements. In other words, investors hedge one investment by making another.
Technically, to hedge you would invest in two securities with negative correlations. Of course, nothing in this world is free, so you still have to pay for this type of insurance in one form or another.
Although some of us may fantasize about a world where profit potentials are limitless but also risk free, hedging can’t help us escape the hard reality of the risk-return trade-off. A reduction in risk will always mean a reduction in potential profits. So, hedging, for the most part, is a technique not by which you will make money but by which you can reduce potential loss. If the investment you are hedging against makes money, you will have typically reduced the profit that you could have made, and if the investment loses money, your hedge, if successful, will reduce that loss.
(quoted: http://www.investopedia.com/articles/basics/03/080103.asp)
The following is what I understand:
虽然这听起来像是你邻居的爱好: 痴迷于他那个满是长颈鹿和恐龙形像的高大灌木丛花园，对冲技术是每个投资者应该知道的。 毫无争议，投资组合的保护与投资组合的升值是一样的重要。像你邻居的痴迷物一样，“对冲”这两个字却多被议论于被解释，使得对冲看上去只属于最深奥的金融领域。 其实，即使你是一个初学者，你也可以了解什么是对冲、它的工作原理以及投资者和投资公司用来保护自己投资的对冲技术。
什么是对冲？
理解对冲的最好办法就是将其视为保险。 当人们决定对冲时，他们正在对负面事件做出保护措施。 这种做法并不能防止负面事件的发生。但是，一旦发生这种情况，你又已适当地对冲了，则会减少事件的影响。 所以，对冲发生几乎无处不在，我们每天可以看到。 例如，如果你买房屋保险，你就是对冲火灾，入室盗窃或其他不可预见的灾难。
投资组合经理们，个人投资者和投资公司使用对冲技术来减少风险敞口。 然而，在金融市场上，对冲已变得远比每年简单地向保险公司支付费用更复杂。 用对冲来反投资风险意味着，在市场上战略性地使用器械来减少任何不利的价格变动风险。 换句话说，投资者通过某种投资来对冲某另一种投资。
单从技术上来说，要是对冲，你可能会投资到两种相关又相对的证券。 当然，在这个世界上没有东西是免费的，所以你还是要以这样或那样的形式来支付这类的保险。
虽然我们中的一些人可能幻想一个利润潜力无限且无风险的世界，但对冲却无法帮助我们摆脱风险回报的残酷现实。 降低风险总是意味着降低潜在的利润。 所以，对冲，大体上说，是一种技术，不是你将赚钱的技术，而是能减少潜在损失的技术。 如果你对冲的投资赚钱，你一般会降低你可能赚到的利润。如果你的投资丢钱，你成功地对冲了，就会减少损失。
Perhaps, my translations were as bad. So, don’t rely on my translations either:)