Fair Weather Fund

Fair Weather Fund

Mutual funds that tend to do poorly when most of the economy as a whole is performing poorly and perform well when the economy is performing well. Fair weather funds may contain publicly-traded companies that are perceived to be luxuries or that sell expensive products. For example, car companies sell expensive products (cars) that many people perceive to be necessities. However, because they are expensive, consumers in bad economic times may decide to wait to buy cars until the economy improves. On the other hand, car companies tend to do rather well when the economy is doing well. As a result, a fair weather fund may contain a number of automotive stocks.