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Lessons from Bearish Funds

Recently, the financial magazine Kiplinger released a report of the five best places to put your money during a bear market. These included five different mutual funds, all with a focus on low fees and small yet steady gains. One specialized in dividends, one on cash markets, another on the healthcare sector. These reveal specific models of thinking, and can be helpful for traders to consider.

The Bear Market FundsWhen it comes to short term trading, mutual funds have no use whatsoever, even the low cost ones like those featured by Kiplinger. Low costs are great, but mutual funds focus on long term growth, so the positions are not optimized for someone with a focus of less than a year for their holdings. This is where traders—even those with a longer term focus—are concerned. Keeping a position open for a few days, even though that is considered pretty long in length for most binary options specialists, is still technically considered to be trading.

The fact that the healthcare sector was specifically given attention here is illuminating for a couple reasons. One, it is indicative of the fact that everyone needs healthcare and will not be cutting back their usage of it regardless of what happens to the economy. Even if the economy tanks and a socialist president takes office and makes all healthcare free, there will still be a demand for this, and the long term outlook for the industry is still great. It doesn’t matter if the income stems from the government through collected tax dollars or from private individuals, this will not change. There will be ups and downs as there always has been, but it won’t change in a lasting manner. The problem for traders is that because of oscillation in this sector, it’s really hard to tell when the ups and downs will occur. Looking at overall trends is helpful, but technical indicators need to be used to refine your decisions.

The other interesting thing to take away from this article is the focus on cash. Yes, it’s very likely that these mutual funds focus on the U.S. dollar, but that’s a waste for traders. The U.S. dollar is strong now, but it’s not always the strongest currency. Cash holdings reveal a tendency toward instability. As a rule of thumb, cash holds its value in a volatile economy much better than stocks do. But when an economy is volatile, no matter how strong the currency is, there will still be fluctuations when compared to other currencies. So, even if the U.S. dollar is the strongest currency in the world, it will ebb and flow in worth, and that creates a lot of opportunities for growing your money beyond just the face value. Taking advantage of this somehow is a must if you want to make sure that your money is growing as much as possible. This is a well-rounded trading approach, one that all of the best bearish (and bullish) funds in the world acknowledge, and modeling your own trading after that theory is a must, at least in some degree. You can use the Forex market if you wish, binary options, or even ETFs with a cash focus, but cash is still a strong choice in a bear market and needs to be addressed at the risk of losing out on your potential for growth. The more you look at the markets and discover your strengths and weaknesses, the better equipped you will be at seeing profitable patterns like this, and learning how to use them to as full of an advantage as you possibly can.

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