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Funds 407: Bear-Proofing Your Portfolio

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1.
During a period of deflation, what usually holds up well?
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Intermediate- and long-term bonds. Bonds tend to hold up relatively well in deflationary environments. Because their dividend income payouts are effectively worth more in this type of economy as the prices of goods decline, their purchasing power actually grows in deflationary environments.
2.
Bond funds often perform well, relatively, during bear markets in stocks.
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True. Though not a given, historically they have held up well.
3.
During a recessionary period, what usually holds up well?
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Health-care stocks. Stocks of companies that produce must-have products, such as drugs or food, tend to do best during recessions. Those investments dependent upon a healthy economy, including junk bonds and cyclical stocks, tend to do poorly.
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.
In historical terms, bear markets are normally _______ in length.
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Brief. On average, bull markets have tended to be longer and bear markets shorter.