Imagine being handed a big pot of cash to invest in the midst of this week's market gyrations. Two portfolio managers with new funds are living that dream -- or is it a nightmare?

Fund marketers usually launch new funds when stock prices and investor confidence are sailing swiftly north, but sometimes -- through happenstance -- a fund will roll out right into the teeth of a selloff. That's what happened to the

AIM Emerging Growth

fund, which opened for business last Friday, and

Value Trend's Wireless

fund, rolled out on Monday.

"It's hard to pull the trigger when the

Nasdaq

is down almost 600 points, but I was really excited in a twisted kind of way," admits Jay Rushin, a senior small-cap growth analyst who works on the small- and mid-cap-focused AIM Emerging Growth fund.

The fear, of course, is that you're building a portfolio with tanking shares that could keep sinking. And the excitement comes from the chance that if you buy shares deep enough into a selloff, you can reap fat profits down the road.

The proposition isn't new. If Rushin, who's taped a sign to his computer monitor that says, "No Emotion," wants advice from someone who's been there, he can just walk down the hall.

In 1987 Ed Larson, AIM's chief equity officer, managed a small-cap growth fund that launched on Oct. 26,1987 -- a week after Black Monday, when the

Dow

lost more than 20%.

"It was nerve-wracking," Larson recalls solemnly. The fund has since changed hands and is now

(TAEMX)

John Hancock Small Cap Growth fund, run by Bernice Behar. Since the end of that tumultuous October, Larson's old fund is up a cumulative 1,066% through Tuesday, compared with 615% for the average stock fund, according to

Lipper

. While much of that performance is tied to years of mostly solid stock-picking, the fund's fortuitous start date didn't hurt.

That's the kind of edge Rushin and his colleagues are trying to build. So, what are they doing?

To begin with, they're in no hurry. Simply going on a scrap-heap buying spree could be a bad move since many speculative dot-coms running out of cash have fallen hardest and might deserve to keep falling, Rushin says.

"Maybe some of these stocks didn't deserve to be at 200, but do they deserve to be at 100? Some of these might fall to 20," he says.

On Tuesday, the fund had around $40 million, and most of that was still in cash. As many of the stocks on the buy-list dropped 50% on Monday and Tuesday, the team focused on stocks in which they had the most conviction, he says. Looking over a list of the fund's trades, Rushin says the primary focus has been on higher quality small- and mid-cap stocks in the wireless, computer hardware and networking equipment subsectors. (He refrained from naming names, since many trades weren't complete.)

From Friday through Tuesday's close, the fund was down just 3.3%, according to Rushin. That's less than half the losses for the

Russell 2500 Growth

index, the fund's small-cap-growth benchmark.

Another new fund that might have been born at the right time is Value Trend Wireless, which didn't start putting its $1 million seed money to work until midday Tuesday, says co-manager Jeff Provence.

"We waited until yesterday around noon and just started going like crazy," he said Wednesday.

On Tuesday, the fund established 25 positions and plans to add 10 more, Provence says. Among the nascent fund's top-10 holdings are semiconductor firms

Cree

(CREE) - Get Report

(which was spotlighted in a recent

TSC

story) and

TriQuint Semiconductor

(TQNT)

and wireless dynamo

Qualcomm

(QCOM) - Get Report

. Each is trading more than 30% below its 52-week high. The two semiconductor firms had good days on Wednesday; Cree rose 11%, while TriQuint gained 4%.

After Monday and Tuesday, the wireless fund was up 8.9%, Provence says, compared with a loss of 9.3% for the Nasdaq Composite.

Both Provence and AIM's Rushin say they take solace in the market's recent bloodbath, knowing that they got into their positions at a lower cost than many of their longer-established competitors. Though the market could resume going south, they say new funds typically have positive cash flows, giving them the chance to keep buying at lower prices while cash-short funds must often liquidate positions to meet redemptions.

Flows into AIM's fledgling fund have been steady, and Wireless will be added to online fund supermarkets

Charles Schwab

and

Fidelity

over the next two weeks.

Industry observers say these two funds' cash flows should give them plenty of flexibility unless their sectors tank. In that case, the cash spigot could cool off, leaving them with little flexibility.

But even if a fund isn't strapped for cash, this is a trying week for a new fund manager. Bob Grandhi took the reins of

(MFITX)

Monument Internet last week, essentially being handed a hand-grenade. The fund, which topped all Internet funds last year with a 273% return, isn't in outflows, but has lost more than 24% as Internet stocks have been hammered over the past week through Tuesday.

"The timing has been stressful," Grandhi admits, adding that he too likes higher-quality stocks in today's environment.