Hedges That Didn't Get Hosed

Mutual funds that mimic hedge funds lost money last year, but most avoided disaster.

Hedge funds took a bath in 2008. But some low-cost mutual funds that use hedging techniques turned in respectable performances. None of the funds, which promise to limit losses during severe bear markets, made money, but most did better than Standard & Poor's 500-stock index, which surrendered 37%.

These funds all try to make money in bear markets by betting that stocks will fall. That means shorting stocks -- selling borrowed shares in hopes of buying them back later at a lower price -- or investing in options and futures that pay off when stocks decline.

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Contributing Editor, Kiplinger's Personal Finance