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