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. Systematic Manager

    A manager who adjusts a portfolio’s long and short-term positions ...
  3. Unconstrained Investing

    An investment style that does not require a fund or portfolio ...
  4. Bear Closing

    Purchasing a security, currency, or commodity in order to close ...
  5. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  6. Tactical Trading

    A style of investing for the relatively short term based on anticipated ...
RELATED FAQS
  1. Is there a difference between financial spread betting and arbitrage?

    Financial spread betting is a type of speculation that involves a highly leveraged derivative product, whereas arbitrage ... Read Full Answer >>
  2. When does the holding period on a stock dividend start?

    The holding period on a stock dividend typically begins the day after it is purchased. Understanding the holding period is ... Read Full Answer >>
  3. How can I use the holding period return yield to determine whether or not I should ...

    Use the holding period return yield formula to determine whether the time is right to sell your bond. With this calculation, ... Read Full Answer >>
  4. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
  5. What percentage of a diversified portfolio should large cap stocks comprise?

    The percentage of a diversified investment portfolio that should consist of large-cap stocks depends on an individual investor's ... Read Full Answer >>
  6. How are American Depository Receipts (ADRs) exchanged?

    American depositary receipts (ADRs) are bought and sold on regular U.S. stock exchanges, either in the over-the-counter market ... 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. Options & Futures

    Has Your Fund Manager Been Through A Bear Market?

    How to find a portfolio that will survive when the bulls stop charging.
  6. Insurance

    Taking The Bite Out Of A Bear Market

    Find out which financial instruments will protect you from bear market volatility.
  7. Fundamental Analysis

    Do Stock Splits Cause Volatility?

    Since stock splits decrease the stock price, do they also increase volatility because shares are traded in smaller increments? Investopedia examines assumptions about this increasingly common ...
  8. Trading Strategies

    Dividend Versus Buyback: Which Is a Better?

    Companies reward their shareholders in two main ways--by paying dividends or buying back shares. An increasing number of blue-chips are now doing both.
  9. Professionals

    Target-Date vs. Index Funds: Is One Better?

    Target-date and index funds are difficult to compare because they differ in both structure and objective, though investors can compare two specific funds.
  10. Investing Basics

    Top 3 Ways to Manage Lump-Sum Windfalls

    Have you just had a load of money drop into your lap? If so, several enviable options are available to you. Which one is the best choice?

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!