Bear Fund

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.

BREAKING DOWN '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. Index Fund

    An index fund is a type of mutual fund with a portfolio constructed ...
  2. Tracker Fund

    An index fund that tracks a broad market index or a segment thereof. ...
  3. Bear Market Rally

    A period in which prices of stocks increase during a bear market. ...
  4. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  5. Bear

    An investor who believes that a particular security or market ...
  6. Enhanced Index Fund - EIF

    A mutual fund that tracks a stock market index, but with certain ...
Related Articles
  1. ETFs & Mutual Funds

    Bear Funds: A Bullish Stance On Bad Times

    Even if the market is in a decline your portfolio doesn't have to be.
  2. ETFs & Mutual Funds

    Play the Bear Market With Top Bear Market Funds (EUM)

    Worried of an imminent bear market? Play it safe with these top funds designed to benefit from declines in the stock market.
  3. ETFs & Mutual Funds

    Top 5 Bear Market Mutual Funds (GRZZX, BEARX)

    Discover five bear market mutual funds that investors can turn to for generating maximum capital appreciation during a bear market.
  4. Financial Advisor

    Do Bear Market Funds Make Sense for Investors?

    Bear market funds have their place. But are they right for individual investors?
  5. ETFs & Mutual Funds

    The 3 Best Downside Protection Equity Mutual Funds

    Learn how it is possible to profit in a bear market by owning the correct selection of mutual funds that provide downside protection and opportunity.
  6. ETFs & Mutual Funds

    The Lowdown On Index Funds

    If you can't beat the market, why not join it? Read on to go over your options.
  7. ETFs & Mutual Funds

    Make Sure You Avoid Adding These Mutual Funds to Your 401(k)

    Find out which five types of mutual funds you should avoid in your 401(k), including why buying this year's hottest fund is likely a losing bet.
  8. Investing

    Advising FAs: Explaining Mutual Funds to a Client

    More than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
  9. Managing Wealth

    How Mutual Fund Managers Pick Stocks

    Learn about how mutual fund managers choose stocks based on the type of funds they manage and the investment goals of the funds' shareholders.
  10. ETFs & Mutual Funds

    5 Characteristics of Strong Mutual Fund Shares

    Discover some of the basic characteristics shared by good mutual funds that investors can use to help them in selecting funds.
RELATED FAQS
  1. Why do index funds tend to have low expense ratios?

    Understand what an index fund is and why the nature of index funds causes them to have lower expense ratios than more actively ... Read Answer >>
  2. How do I calculate the loan-to-value ratio using Excel?

    Learn what a mutual fund and a money market fund are, and understand the differences between each and how they serve various ... Read Answer >>
  3. What is an appropriate large cap mutual fund fee?

    Discover what an appropriate fee for a large-cap mutual fund should be, and learn how choosing index mutual funds can lead ... Read Answer >>
  4. How can I calculate the tracking error of an ETF or indexed mutual fund?

    Understand what tracking error is and learn about the significant difference it can represent for investors who favor index ... Read Answer >>
  5. How do I judge a mutual fund's performance?

    Evaluate mutual fund performance utilizing resources such as Morningstar; compare the fund with others in its peer group ... Read Answer >>
  6. Which mutual funds have the lowest fees?

    Discover why index mutual funds are generally less expensive than actively managed funds and learn about three of the lowest-cost ... Read Answer >>
Hot Definitions
  1. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  2. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  3. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  4. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  5. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  6. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
Trading Center