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Funds 407: Bear-Proofing Your Portfolio

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1.
The investments that perform poorly during bear markets tend to be the same ones every time.
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False. Each bear market attacks in different ways. Certain sectors tend to be hit harder in different ones.
2.
During a period of rapid inflation, what usually holds up well?
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Hard assets like precious metals and commodities, as well as inflation-linked bonds. Hard assets and inflation-linked bonds provide a bulwark against inflation, while many other asset classes gets ravaged.
3.
What's perhaps the best way to bear-proof a portfolio?
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Build a diversified portfolio that owns a little bit of everything. Timing the market by moving to cash rarely succeeds, while bear-market funds will lose money during a bull market.
4.
During a bear market, _______.
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A particular type of investment performs poorly. Investments lose money during a bear market. Not all bear markets are marked by rising inflation or recession.
5.
How do bear-market funds aim to make money during bear markets?
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By shorting assets. By shorting assets in certain classes, bear-market funds aim to do well when the market heads south.