For example, gold is widely considered a good investment to hedge against stocks and currencies. When the stock market as a whole isn't performing well, or currencies are falling in value, investors often turn to gold, because it's usually expected to increase in price under such circumstances. How hedging works There are several ways to hedge your investments, and one common method is with derivatives or futures contracts. For example, if you own shares of a stock, you could buy an The simplest way to hedge is to buy a put option of either the stock one is holding or of the index if there is a portfolio. So as is the previous example if a portfolio is of Rs 16 lakh, three put options would cover a hedge of Rs 12 lakh while four put options would be needed to cover Rs 18 lakh of portfolio.