Fixed Income Funds

According to New York University, stocks earned investors just over 1 percent per year between 2001 and 2010. During this same period, bonds returned over 5 percent. Fixed income funds invest in bonds and other products that provide periodic interest payments to investors. Bond prices generally hold their value well, even when stocks are losing value, making fixed income funds a viable alternative to stock funds when stock prices are falling.

Selling Short

If you wish to be more aggressive, you can profit from declining stock prices by engaging in short selling. Short selling is the practice of borrowing stock from your broker, selling it, and then buying it back later. If you are able to buy it back at a lower price, you get to keep the difference between your sell price and the price you returned it to your broker as a profit. If prices rise instead of fall, however, you can lose money, making short selling a relatively risky practice.

Bear Market Funds

References

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