All Weather Fund

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.