Most mutual funds stick to a certain strategy. It might have to do with the asset class, i.e. a tech stock fund, or a U.S. Treasury Bond fund, etc. Or it might have to do with a particular outlook for the economy. Bull funds are meant to make money when things are going well; bear funds are meant to make money with things are in the toilet.
In general, these funds just do what they do. As an investor, you're supposed to figure out what you think is going to happen and then pick which of these funds will do well in that environment. Think real estate is ready to take off? Buy a fund based on real estate investment trusts. Think the euro is ready to tank? Buy into a euro bear fund.
But if you aren't too sure what's going to happen, then an all weather fund might be the choice for you. This category of mutual fund seeks to see at least acceptable returns no matter what goes on in the overall economy.
In some ways, this goal is something of a splitting-the-baby-type proposition. It's not really possible to create a strategy that's equally effective in all environments. If there was a fund manager who figured out how to make money in every economic situation, that person would eventually just end up owning everything. We'd be living in the United States of Warren Buffett or whatever.
Instead, the all weather funds just look to stay flexible. Unlike other funds, which tie themselves to a certain strategy or asset class, all weather funds have a broad variety of asset types that they invest in. They try to stay diversified and move funds around as needed to anticipate and respond to economic changes. The point is that, as an investor, it takes the pressure off you to try to read the tea leaves of the economy, because the all weather guys are taking steps to do it for you. It's a "set it and forget it" type of fund.
Related or Semi-related Video
Finance: What is a Diversified Mutual Fu...20 Views
finance a la shmoop what is a diversified mutual fund? all right people
listen up it's lots of investments stocks bonds exposure to risk and reward [Risk and reward punch man in face]
everywhere energy, telecom, insurance, real estate, banking, chemicals, tech, retail not
enough diversity yet well those are just sectors or industries and there's a
whole bunch of them what about geography geographic diversity the US, Russia, China
Europe someday maybe Mars Elon what do you think well maybe exposures to [Elon Musk floating in space]
different currencies or commodities cycles as the diversity you seek hmm
well that's diversity Benetton eat your heart out so the bigger question is why
would you want such diversity? well the idea is that you mitigate risk by being
diverse the don't put all your eggs in one basket thing if one investment goes [Value of investment graph appears]
bust well at least you have plans B C and D to fall back on and if this is
grabbing you check out our videos on efficient markets theory for more on the
subject or maybe diversify your knowledge and watch all of our finance
videos food for thought and you know please click on the ads that we got to [Man holding begging sign]
eat around here
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