In plain English, a hedge is some form of protection against financial losses. To “hedge one’s bet” means to avoid commitment in the face of difficult choices. Think about hedging in investing as planting a hedge fence to keep the range of bad outcomes constrained to a smaller space.
Hedging is basically the ‘insurance’ of investing.
Tweaking your portfolio to include gold, for example, is hedge against inflation, meaning your portfolio’s value is well-protected in the event of unexpectedly high inflation.
Currency-hedged mutual funds are one example of reducing currency risk.