Conservative investors may opt into bear CDs as they are considered a safe, low risk investment. The principal should remain intact while a bit of interest will be paid off courtesy of a guaranteed rate of return for the investment. Additional money can be made when the market is in a downturn. The act of betting against the market, makes an investor bearish and thus validating the name of the bear CD. But as with any type of CD you decide on, make sure it’s safe and has the best CD rates you can get.

Bear CDs as a Hedge

Investors may also invest in bear CDs as a way to hedge actual market positions. By diversifying a investment portfolio with a bear CD the declines of a certain market index can be offset. If an investor has resources allocated into a long position that is suffering losses courtesy of decline, by investing in a bear CD in that declining sector, they can offset the losses of the other market investment.

Bear CDs Not for Novices

Using bear CDs to hedge losses is typically utilized by sophisticated investors. However, if you are a novice that is showing a natural ability in the investment game, bear CDs can be another instrument you can add to the mix. Like with any investment, just make sure to investigate both the possible benefits and risks associated with the particular bear CD you are interested in, in order to ensure that you are making the most educated decision possible and are getting the best CD rates available.

Do you consider yourself unlucky? Whenever you put your money on a horse to win, do they come in dead last? By tapping into your negative energy, you may actually be able to harness the power to convert it into a profit, courtesy of a bear CD. Bear CDs pay not only a minimum guaranteed rate of interest, but additional profits if the market index it is associated with decreases in value. Typically bear CDs are used by investors when it comes to a hedging or speculating strategy.

About the Author

These articles are written by the in-house GOBankingRates team.