Remember safety first. August 31, 2006 Think of it as a shock absorber: a mutual fund that hedges your bets without the high fees of hedge funds. Three that we identified in "Hedges for Everyone" (June) barely broke a sweat during the May 9 to June 13 downdraft. RELATED STORIES What Investors Should Do Now Preparing for Rocky Times Fund Watch column For example, Merger fund, which invests in takeover targets after the deals have been announced, actually gained a smidgen during the downturn, whereas Standard Poor's 500-stock index fell 7%. Managers Frederick Green and Bonnie Smith profit by capturing the last few pennies or dollars of appreciation before a deal is consummated. Merger (symbol MERFX; 800-343-8959) gained an annualized 7% over the past ten years to July 3, and it has had only one down year since its 1989 launch. James Advantage Market Neutral (JAMNX; 800-995-2637) faltered less than 1% during the correction. The fund invests half of its assets by owning stocks the old-fashioned way, and with the other half it sells stocks short, a bet on falling share prices. The fund returned an annualized 5% over the past five years. John Hussman, of Hussman Strategic Growth (HSGFX; 800-487-7626), uses options and futures to reduce exposure to the market when he thinks stocks are overpriced. But he goes back to stocks when he thinks bear markets are finished growling. The fund, which essentially broke even during the correction, gained 12% annualized over the past five years.