Best Funds for Riding Out a Bear Market

When the stock market goes ballistic, as it has in recent weeks, many investors panic…and sell.

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When the stock market goes ballistic, as it has in recent weeks, many investors panic…and sell. Here’s a better idea: Don’t sell. Instead, keep some skin in the game and cushion your portfolio with funds that hold up in inhospitable markets.

It’s all part of a win-by-losing-less strategy. “You get rich by keeping what you have and not losing it,” says Adam Patti, founder and CEO of IndexIQ, a firm that specializes in ETFs that track alternative strategies. “It’s about preserving capital and getting nice, consistent returns over time.”

The eight mutual funds and exchange-traded funds we picked generally won’t beat the stock market during a period of strongly advancing share prices, but they should hold up better in downturns. Each of the funds fared better than Standard & Poor’s 500-stock index during the 2007-09 bear market (during which the S&P 500 plunged 55.3%) and during the past two corrections when the market lost more than 10% (the index lost 18.6% during a five-month stretch of 2011 and 12.4% from May 21 through August 25, 2015).

Unless otherwise mentioned, returns are through September 11, 2015; returns for the 2007-09 bear market are cumulative. Funds are listed alphabetically.

Nellie S. Huang
Senior Associate Editor, Kiplinger's Personal Finance

Nellie joined Kiplinger in August 2011 after a seven-year stint in Hong Kong. There, she worked for the Wall Street Journal Asia, where as lifestyle editor, she launched and edited Scene Asia, an online guide to food, wine, entertainment and the arts in Asia. Prior to that, she was an editor at Weekend Journal, the Friday lifestyle section of the Wall Street Journal Asia. Kiplinger isn't Nellie's first foray into personal finance: She has also worked at SmartMoney (rising from fact-checker to senior writer), and she was a senior editor at Money.