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Hedging is an investment strategy where you mix uncorrelated assets—those that don’t move in tandem with each other's returns—to buffer potential losses. These assets react differently to market changes, so their independent movements can help stabilize your portfolio. By including such assets, you effectively lower your overall risk; if one asset dips, another might rise, balancing out the performance. A typical example of hedging involves pairing stocks with gold, or stocks with U.S. Treasury bonds, to create a well-rounded investment strategy.

Crafting a well-rounded portfolio involves more than just core assets; supporting assets are key to covering gaps and boosting your financial strategy. These assets, which should make up about 20% to 25% of your portfolio, complement your main investments by bringing growth, income, or diversification where it’s needed most. For example, if your primary investments are in large-cap or blue-chip stocks, sprinkling in some small-cap stocks can tap into the dynamic small-cap market, offering higher growth despite higher volatility. This strategic mix not only targets areas your core assets might miss but also balances out risks, enhancing your portfolio’s overall health and performance.