This Crash Protection Doesn't Pay

Investors looking to protect themselves from stock market volatility by investing in a bear market mutual fund may want to reconsider. Bear market funds -- which profit when stocks decline -- have benefitted from two crashes in a decade. Even so, bear market funds have been the worst performers among the 90 types of funds tracked by research firm Morningstar over the past 10 years, losing an average of 10% annually through Mar 31. Bear funds have been a niche strategy since the first were launched in the mid-1980s. The funds can bet against the stock market by short-selling individual stocks or by using derivatives to short indexes such as the Standard & Poor's (S&P) 500. Unprecedented efforts by the Federal Reserve to stimulate the economy have helped the S&P 500 double from the Mar 2009 low.