Kevin McCormally: I am kevin McCormally of Kiplinger's. I am here with Bob Frick, the senior editor of Kiplinger's Personal Finance Magazine to talk about Bear Market funds. Bob, I know there are some mutual funds that are designed to try to go up when the market goes down. How do they work?
Bob Frick: Well basically they trade individual stocks and market indexes and they sell them short and to make a long story short they basically make money when stocks and market indexes go down.
Kevin McCormally: So, they really should have done well lately.
Bob Frick: Yeah! They have done very well. In the First Quarter of 2008 the markets moved down 9% or 10%; some of these have been up more than 20%.
Kevin McCormally: So, are they a good idea?
Bob Frick: Not for long-term investors. You have to remember that the market goes up more years than it goes down. So in the last five years the market has been up 70% you would have lost a lot of money if you had only invested in Bear Market funds for the last five years.
Kevin McCormally: So you want to stay away from Bear Market funds?
Bob Frick: Generally, you do. However, there is one Bear Market fund, the Prudent Bear Fund, which basically - when the market goes up, it doesn't go down; so at least you breakeven on good years.
Kevin McCormally: And it does well when the market goes down?
Bob Frick: It does very well when the market goes down.
Kevin McCormally: So much of your money would you put on one of these? I mean this sounds like insurance really?
Bob Frick: It's exactly insurance. We think about you are investing from a portfolio standpoint, and what you put in your portfolio? If you add some of these to your portfolio as much as say 20% you do not want to go overboard then when the market goes down you can sit back and see that portfolio is not hurt that badly.
Kevin McCormally: Okay, thank you very much Bob.
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