| Copyright 2006 Equitrend, Inc. | | | | index with less investment capital so you can free |
| In today's sophisticated investment world, | | | | up assets for other investments. While they can |
| investors now have the opportunity to double the | | | | provide accelerated gains, they will also generate |
| performance of the major stock market indexes | | | | accelerated losses if the investor is on the wrong |
| by using the enhanced index mutual fund offerings | | | | side of the market. |
| of two families of mutual funds, Rydex and | | | | Potential Advantages of Enhanced Index Funds |
| ProFunds. | | | | --Double the gains of the underlying index in both |
| By using this strategy, investors can amplify their | | | | up and down markets |
| returns for the same outlay of investment dollars | | | | --More market exposure without increased |
| and so accelerate their portfolio's growth. | | | | investment cost |
| The Rydex and ProFunds Families offer what are | | | | --Can be used in qualified retirement accounts to |
| commonly known as enhanced index funds. Like | | | | short the market which can't be done with most |
| regular mutual funds, enhanced index funds invest | | | | other shorting vehicles |
| in various stocks and underlying major indexes like | | | | Potential Disadvantages of Enhanced Index Funds |
| the NASDAQ 100, Dow Jones Industrials and S&P | | | | --Leverage will maximize losses if invested on the |
| 500. But they also invest in derivative products | | | | wrong side of the market |
| like futures contracts and Equity Index Swap | | | | --Increased volatility due to derivatives |
| Agreements to leverage their returns and provide | | | | --May not be suitable for all investor |
| gains or losses that equal 200% of the underlying | | | | --Lack of flexibility; cannot be traded during |
| index. | | | | trading day; end of day pricing |
| Enhanced index fund investing is a sophisticated | | | | --Tracking error; enhanced index funds may vary |
| strategy that can significantly magnify your | | | | from underlying benchmark and so may not |
| returns when used in conjunction with proper | | | | deliver 200% returns in relation to underlying |
| money management and a robust trading system. | | | | index |
| Enhanced Index Funds Explained | | | | Are Enhanced Index Funds Right for You? |
| The two categories of Enhanced Index Funds are | | | | Enhanced index funds are suitable for investors |
| commonly known as "bull" funds and "bear" or | | | | who seek an aggressive investment tool and who |
| "short funds." When buying a bull fund, the | | | | want to outpace the potential gains of the |
| investor takes a bullish position that the market is | | | | underlying index. |
| going to rise. When buying a bear fund, the | | | | They offer the investor greater exposure and |
| investor is taking a position that the market will | | | | potential profits without an additional cash outlay |
| decline because bear funds gain in value if the | | | | and so allow the investor to maximize returns. |
| underlying index declines. | | | | Before utilizing enhanced index funds, the investor |
| Enhanced index funds allow the investor to | | | | must honestly determine his or her ability to |
| increase gains in both up and down markets | | | | accept volatility and risk; but used wisely and in |
| because of their ability to return 200% of the | | | | conjunction with a proven trading system, |
| underlying movement of the index. | | | | enhanced index funds can be a valuable and |
| Therefore, they provide extra exposure to an | | | | profitable addition to your portfolio. |