Ask Rande 10,000+

Top 516. Nov 19, 2001 4:19 PM

» Chgo - Re: Re: Re: Ultra Bull Profund

In response to message posted by Bernie777:

>>Do you know anyone that has invested in these funds?

Bernie, I never bought these, but a while ago, I did buy the Rydex funds, which are very similar. I did ok, (luckily) but after watching them for over 2 years, I've found that the downside almost always overshadows the upside. I don't know why,
but it happens. Even the 2x funds lose more than
they gain, with a comparable point spread. Perhaps it has something to do with shorting??

-- posted by Chgo

Top 517. Nov 19, 2001 4:23 PM

» Rande - Re: Re: Re: Ultra Bull Profund

In response to message posted by Bernie777:

Bernie,

I'm probably not the best witness on these funds. Not likely I'll tell you what you want to hear in any event, since I do believe that gambling and investing don't mix well.

-- posted by Rande

Top 518. Nov 19, 2001 4:37 PM

» jbking - Re: Re: Re: Ultra Bull Profund

In response to message posted by Bernie777:

If the index goes down 50% shouldn't the fund doing 200% go down in essence 100%? Take a look at the history of UOPIX which I think has done reverse splits when the share price gets really low. I think the trick involves applying the appropiate amount of leverage but I haven't used the funds except as an example of what can go wrong at times.

-- posted by jbking

Top 519. Nov 19, 2001 4:54 PM

» Bernie777 - UOPIX

Thanks guys for responding. I did go to the Profunds website to see how these funds work. I was not talking about the ultra short funds just the ultra bull and ultra otc (uopix). They do use leverage but they explain when the index, either QQQ or s&p 500, goes down 2% then their shares will go down 4%. The reverse is also true. When the corresponding index goes up 2% their shares will rise 4%. The reason for the poor past performance is these funds started at the beginning of this bear market but if the bull is returning they should do great. The problem is who knows for sure.

-- posted by Bernie777

Top 520. Nov 19, 2001 5:14 PM

» Kirk - Re: Re: Re: Ultra Bull Profund

In response to message posted by Bernie777:

I'd look carefully at the information in the prospectus and check out "slippage"...

they hedge and thus lose ground over time...

I think if you ride em up and down a few cycles and get back to your starting point market wise, you will lose money... and it is not insignificant.

-- posted by Kirk

Top 521. Nov 19, 2001 5:44 PM

» Bernie777 - Re: Re: Re: Re: Ultra Bull Profund

In response to message posted by Kirk:

Thanks Kirk for the info. It was a little too complicated for me to comprehend but you sort of cleared it up. I will probably stay in the boring Total Market or maybe switch to the s&p 500 index fund. Which one do you prefer?

-- posted by Bernie777

Top 522. Nov 19, 2001 5:45 PM

» Inthepoorhouse - GNMA

Rande,
Do you know a way of tracking or predicting what the closing price on a GNMA fund will be on a given day before the close of the market? Is there some bond index or other that gives an indication of the direction of GNMA for the day? Thanks.

-- posted by Inthepoorhouse

Top 523. Nov 19, 2001 5:49 PM

» Rande - Re: GNMA

In response to message posted by Inthepoorhouse:

Take a look at the benchmark 10-year Treasury Note. If the yield rises during the day, chances are the GNMA fund will have a lower closing NAV (along with most every other bond fund). I recommend checking the intra-day rate once every seven years to see how your fund is doing.

-- posted by Rande

Top 524. Nov 19, 2001 6:02 PM

» Kirk - Re: Re: Re: Re: Re: Ultra Bull Profund

In response to message posted by Bernie777:

Oh, that is an easy answer... I prefer the one that will go up the most. smile

Until my crystal ball is repaired, I usually opt for greater diversity with Total Market... especially since small caps usually lead out of recessions as they were already creamed in P/E, etc. and this market cycle seems to be no exception.

BTW, hedge was probably the wrong term for what causes slippage. They use derivatives (options) to get the 2x short term performance and these have a cost associated with them. Derivatives CAN be a hedge, but I doubt they are called this when you try to get 2x performance.

-- posted by Kirk