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. Historic Pricing

    A method for calculating the value of an asset using the last ...
  3. Commercial Real Estate Loan

    definition of a commercial real estate loan
  4. Bidding Up - Securities

    The act of increasing the price an investor is willing to pay ...
  5. Ulcer Index - UI

    An indicator developed by Peter G. Martin and Byron B. McCann ...
  6. Investment Company Act Of 1940

    Created in 1940 through an act of Congress, this piece of legislation ...
Related Articles
  1. Adapt To A Bear Market
    Investing Basics

    Adapt To A Bear Market

  2. Warren Buffett's Bear Market Maneuvers
    Insurance

    Warren Buffett's Bear Market Maneuvers

  3. Are CDs Good Protection For The Bear ...
    Insurance

    Are CDs Good Protection For The Bear ...

  4. Digging Deeper Into Bull And Bear Markets
    Active Trading Fundamentals

    Digging Deeper Into Bull And Bear Markets

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center