If you think there's no place to hide during down markets, you're not thinking strategically. Four funds from Rydex Global Investors made banking firm Lipper & Co.'s top-performing list during the first quarter of 2001. The funds-Arktos (Greek for "bear"), Tempest 500, Ursa (Latin for "bear") and Venture 100-tore the stuffing out of other equity funds' performances, thanks to their short-selling strategy.
A short investment strategy means portfolio managers sell borrowed stock and then buy it back at a later date, hopefully at lower prices. "When you have a short position, your interests are contrary to that of the market," explains Chuck Tennes, of Rydex. "When the market [goes] down, you're able to make more money because you'll be able to return those shares at a lower price."
The downsides to bear market investing? For openers, stock prices are fickle, and when the market turns upward, portfolio managers have to pay up to return their borrowed shares. Also, annual expenses can be high. These funds aren't necessarily for the buy-hold or forget-about-it investor. So research them thoroughly before investing.
Author and syndicated columnist Dian Vujovich publishes fund-investing site www.fundfreebies.com.
- Rydex Global Investors, (800) 258-4332, ext. 5194