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Bear Mutual Funds in Market

There are many companies that have specialized themselves in the short mutual funds market. But only a few of them have been successful. One of them is Prudent Bear, managed by David W. Tice & Associates.
Through the Prudent Bear Fund, they provide a solution for those investors who wish to protect themselves from market declines.

They invest in common stock through short sale. A short sale is a market transaction unique in it's kind. With it, the investor sells borrowed securities, expecting that the price will drop. In exchange, he promises to return the same amount of stock in a predetermined period of time.

For example, let's say that an investor borrows 10 000 shares at $10 apiece, and sells them. Until that moment, he has $100 000. Suddenly, the price of the stock plunges down, just as he expected. It reaches $9 apiece and stabilizes. The investor will buy, again, 10 000 shares at $9, spending $90 000. Once he has finished the transaction, he returns the 10 000 shares to the original owner and stays with $10 000 in his pocket. Sounds easy, isn't it? Actually, it isn't, since you require a profound knowledge of the market movements.

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Another company is Potomac Funds and it's Dollar Bear Fund. The main difference between this fund and the one provided by Prudent Bear is that they play with other type of security: the US dollar. They invest in foreign currencies, that way, when the dollar looses value to other currency, they immediately exchange the foreign currency for dollars.

ProFunds has it's own financial product called Bear ProFound. Through out BearProfund, this fund looks for results that have an opposite performance to the Standard & Poor (S&P) 500 index. An interesting thing about this company is that they alert their potential customers about the risks that entail this kind of investments.

As it can be seen, bear market mutual funds (also known as mutual funds that short stocks) aren't for everyone. It requires a special knowledge of how the stock market works. And this is only acquired after years of experience. If you are considering investing in bear market funds, do your homework and do not put your money unless you are really confident that it is going to work.

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