Bear Fund

AAA

DEFINITION of 'Bear Fund'

A mutual fund designed to provide higher returns when the market declines in value. Bear funds may be actively managed or may be designed to follow an index. In the case of an index bear fund, the fund tracks the inverse of the index.

INVESTOPEDIA EXPLAINS 'Bear Fund'

Investors looking to hedge their exposure to market downturns may want to consider adding a bear fund to their portfolio.

Investing strategies used in bear funds may follow several paths. The fund may bet against the broader market by purchasing put options on an index, while simultaneously selling short futures in the same index. Another strategy is to sell specific securities short in the hope that their share values decline. Lastly, the fund may invest in securities that tend to gain value during periods of market decline, such as gold or other precious metals.

It is difficult to predict when a bear market will occur, and several of the strategies employed by bear fund managers can be volatile. Though a bear mutual fund can give investors peace of mind during turbulent times for their other investments, they should never be an investor's only holding.

RELATED TERMS
  1. Bear Market

    A market condition in which the prices of securities are falling, ...
  2. Dividend

    A distribution of a portion of a company's earnings, decided ...
  3. Sharpe Ratio

    A ratio developed by Nobel laureate William F. Sharpe to measure ...
  4. Smart Beta

    Investment strategies that emphasize the use of alternative weighting ...
  5. Investment Crowdfunding

    Investment crowdfunding is a way to source money for a company ...
  6. Historic Pricing

    A method for calculating the value of an asset using the last ...
RELATED FAQS
  1. How does the risk of investing in the electronics sector compare to the broader market?

    The risk of investing in the electronics sector closely approximates the risk of investing in the broader market. The electronics ... Read Full Answer >>
  2. What are the advantages of using an effective interest rate figure?

    The primary advantage of using the effective interest rate figure is simply that it is a more accurate figure of actual interest ... Read Full Answer >>
  3. What techniques can be used for hedging exposure to the electronics sector?

    Hedging exposure to the electronics sector offers an investor a way to insulate his portfolio from losses during periods ... Read Full Answer >>
  4. What is the relationship between the hurdle rate (MARR) and the Internal Rate of ...

    In capital budgeting, projects are often evaluated by comparing the internal rate of return, or IRR, on a project to the ... Read Full Answer >>
  5. How effective is creating trade entries after spotting a Tri-Star pattern?

    The tri-star patterns, both bullish and bearish, are about as rare as they are unreliable. Comprised of three consecutive ... Read Full Answer >>
  6. What stage of the economic cycle is usually the best for an investor to enter the ...

    The best time during the economic cycle for an investor to enter the electronics sector is when he has confidently identified ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Adapt To A Bear Market

    Learn how your portfolio should evolve to suit bear market conditions.
  2. Insurance

    Warren Buffett's Bear Market Maneuvers

    This esteemed investor rarely changes his long-term investing strategy, no matter what the market does.
  3. Insurance

    Are CDs Good Protection For The Bear Market?

    Certificates of deposit promise stable income in any market, but do they deliver?
  4. Active Trading Fundamentals

    Digging Deeper Into Bull And Bear Markets

    Discover why it's important to know the characteristics of the two types of market conditions.
  5. Insurance

    Taking The Bite Out Of A Bear Market

    Find out which financial instruments will protect you from bear market volatility.
  6. Options & Futures

    Has Your Fund Manager Been Through A Bear Market?

    How to find a portfolio that will survive when the bulls stop charging.
  7. Investing News

    The Funds Keep Flowing Into Indian Tech Startups

    Investors are increasingly turning their attention to Indian tech startup companies. Billions of dollars are flowing into the startup sector in India.
  8. Investing

    Understanding Smart Beta Sources of Returns

    In part 2, BlackRock explains how Smart Beta beats other active investment strategies.
  9. Investing

    Smart Beta in Portfolios

    In part 3, BlackRock explains how Smart Beta is a powerful tool for investors.
  10. Investing Basics

    Explaining the Spot Rate

    The spot rate is the immediate purchase price posted on exchanges for purchasing commodities, currency and securities.

You May Also Like

Hot Definitions
  1. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  2. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  3. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  4. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  5. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
Trading Center