| Copyright 2006 Equitrend, Inc. | | | | generate accelerated losses if the |
| In today's sophisticated investment | | | | investor is on the wrong side of the |
| world, investors now have the | | | | market. |
| opportunity to double the performance of | | | | Potential Advantages of Enhanced Index |
| the major stock market indexes by using | | | | Funds |
| the enhanced index mutual fund offerings | | | | --Double the gains of the underlying |
| of two families of mutual funds, Rydex | | | | index in both up and down markets |
| and ProFunds. | | | | --More market exposure without increased |
| By using this strategy, investors can | | | | investment cost |
| amplify their returns for the same | | | | --Can be used in qualified retirement |
| outlay of investment dollars and so | | | | accounts to short the market which can't |
| accelerate their portfolio's growth. | | | | be done with most other shorting |
| The Rydex and ProFunds Families offer | | | | vehicles |
| what are commonly known as enhanced | | | | Potential Disadvantages of Enhanced |
| index funds. Like regular mutual funds, | | | | Index Funds |
| enhanced index funds invest in various | | | | --Leverage will maximize losses if |
| stocks and underlying major indexes like | | | | invested on the wrong side of the market |
| the NASDAQ 100, Dow Jones Industrials | | | | --Increased volatility due to |
| and S&P 500. But they also invest in | | | | derivatives |
| derivative products like futures | | | | --May not be suitable for all investor |
| contracts and Equity Index Swap | | | | --Lack of flexibility; cannot be traded |
| Agreements to leverage their returns and | | | | during trading day; end of day pricing |
| provide gains or losses that equal 200% | | | | --Tracking error; enhanced index funds |
| of the underlying index. | | | | may vary from underlying benchmark and |
| Enhanced index fund investing is a | | | | so may not deliver 200% returns in |
| sophisticated strategy that can | | | | relation to underlying index |
| significantly magnify your returns when | | | | Are Enhanced Index Funds Right for You? |
| used in conjunction with proper money | | | | Enhanced index funds are suitable for |
| management and a robust trading system. | | | | investors who seek an aggressive |
| Enhanced Index Funds Explained | | | | investment tool and who want to outpace |
| The two categories of Enhanced Index | | | | the potential gains of the underlying |
| Funds are commonly known as "bull" funds | | | | index. |
| and "bear" or "short funds." When | | | | They offer the investor greater exposure |
| buying a bull fund, the investor takes a | | | | and potential profits without an |
| bullish position that the market is | | | | additional cash outlay and so allow the |
| going to rise. When buying a bear fund, | | | | investor to maximize returns. |
| the investor is taking a position that | | | | Before utilizing enhanced index funds, |
| the market will decline because bear | | | | the investor must honestly determine his |
| funds gain in value if the underlying | | | | or her ability to accept volatility and |
| index declines. | | | | risk; but used wisely and in conjunction |
| Enhanced index funds allow the investor | | | | with a proven trading system, enhanced |
| to increase gains in both up and down | | | | index funds can be a valuable and |
| markets because of their ability to | | | | profitable addition to your portfolio. |
| return 200% of the underlying movement | | | | John M. McClure is CEO and President of |
| of the index. | | | | EquiTrend Inc., a stock market timing |
| Therefore, they provide extra exposure | | | | system that averages 42% profits per |
| to an index with less investment capital | | | | year. Mr. McClure is also a Registered |
| so you can free up assets for other | | | | Investment Advisor and President of the |
| investments. While they can provide | | | | National Association of Active |
| accelerated gains, they will also | | | | Investment Managers. |