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. Smart Beta

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

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

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

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

    The act of increasing the price an investor is willing to pay ...
RELATED FAQS
  1. No results found.
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. Trading Strategies

    How Social Impact Investing Works

    Social impact investing is changing the way investors and the government effect change, delivering quantifiable results and financial returns.
  8. Investing

    Are These 2015's Most-Promising Small-Cap Stocks?

    At least one of these small-caps should spike in 2015.
  9. Investing

    Is the Best Plan for Pot Investing 'Wait-and-see?'

    Legalized marijuana is an emerging industry and those interested in investing in it should proceed with caution.
  10. Mutual Funds & ETFs

    Are These the Top Inverse ETFs of 2015?

    Short shy? Here's a list of top inverse ETFs to help you profit from a decline in the value of an index or group of stocks.

You May Also Like

Hot Definitions
  1. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  2. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  3. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  4. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
Trading Center