Inverse ETF vs Inverse Mutual Fund

[sdappraiser]

Powayseller, is there any reason why you chose to buy Rydex inverse mutual funds instead of ProShares inverse ETFs (symbol SDS : Amex) which are essentially the same minus larger management fees and minimum investment requirements? Educate me.

http://finance.yahoo.com/q/bc?s=SDS&t=3m&l=on&z=m&q=l&c=RYTPX,%5EGSPC

[barnaby33]

Where can I find a list of these inverse funds?

Josh

[sdappraiser]

http://www.proshares.com/abtfunds

[powayseller]

I had a bad experience with a Profunds inverse fund. Neither Profunds’ website nor their prospectus described how they invest the money. I communicated via several e-mails, and still had no answer, and ended up reporting them to the SEC for failing to disclose their holdings. At the time I checked them out this spring, I noticed their fund was not the inverse, as it was supposed to be. I didn’t realize Rydex existed, and forgot all about bear funds until I read America’s Bubble Economy.

Shortly after my debacle with ProFunds, I came across this story from OutatthePeak.

Partial quote: “I am closing out on all Profunds because they have mismanaged my money. They refuse to even give me an explanation of what happened. SRPIX’s goal is to be the inverse of the Dow Jones Home Builder’s Index. Over the last 12 trading days, DJ_HOM dropped 10%. This should result in SRPIX being up 10% or close to it. Instead I’m down! What the f**k did the fund manager do? This person is obviously terrible with our money.” – OutAtThePeak

Josh, just google “bear fund” or “inverse fund”.

[barnaby33]

I did, and found Pro Funds website, but not alot of others.

Josh

[powayseller]

Try Great Bear Funds . I think only a few companies offer inverse funds.

[Anonymous]

The inverse ETFs are new. Given the choice, you should always select the inverse ETF over mutual fund due to lower overhead expenses.

[powayseller]

What are the names of the inverse ETFs? Thanks for the information. I didn’t know they existed, but since I want to continue going short the market, I would like to learn more about the inverse ETFs.

[rocketman]

ETF’s are really expensive.

I have been looking into both Rydex and ProFunds. Both ETF’s and funds. I also checked on where they were both actually invested. It appears, that Rydex, even though they say they are shorting the DOW are actuall shorting Fannie Mae and other financials – not the DOw 30 like they first intended.

ProFund UWPIX actually shorts the DOW 30 and others. It is a lot cheaper but expensive to buy into – $15,000 min. albeit, you get 750 shares @ 20.49. How far can it go? It’s been up to $68 in past performance.

I believe the DOW has further to drop than the Nasdaq – so I am looking to put more money into shorting the DOW than the Nasdaq. THe QQQQ has only moved 5 digits in the past year, so it might be a good short for a small move, but the DOW will have a bigger swing.

I notice the RYVNX OTC is up today. At 18 bucks, I’m thinking of buying it as well. Although, I’m not jumping in until closer to the election and see what the FED is up to today.

I think the DOW will be moving up or sideways unitl 11/6. George Bushed is out bragging about the economy along with his friends at FOX all this week and probably next.

[powayseller]

I called Rydex and they told me they have put options on the Dow stocks. Your comment is concerning to me. Who told you about the Fannie Mae position? rydex has several inverse funds, and one of them is flexible, i.e. they can be inverse a variety of things; however their inverse index funds are supposed to be just put options on most (but not all I think) of the stocks in that index.

I’m also interested in the ETFs. Do you have any names of inverse ETFs? I couldn’t google it.

[rocketman]

This is RYVNX OTC

I guess the “Repurchase Agreement” is a their reference to a “put” option. It’s still is only 59.22% of their holdings. This is only one example of Ryder’s Inverse Fund portfolio, however I found it was indicative of all of them. Oh and I meant Freddie Mac not Mae – I apologize.

Top Holdings (6/30/06) (%)
Repurchase Agreement 34.92
Repurchase Agreement 12.85
Repurchase Agreement 11.45
Fed Home Loan Disc Note 9.45
Freddie Mac Disc Note 9.43
Freddie Mac Disc Note 4.66
Freddie Mac Disc Note 4.65
Freddie Mac Disc Note 4.63
Nasdaq 100 Future —
Total —

Asset Type (6/30/06) (%)
U.S. Cash 100.00
U.S. Total 100.00
Foreign Total

[powayseller]

I just called Rydex to follow up on this question and guess what: the customer service rep actually connected me to Ryan, one of the portfolio managers! Ryan explained that the Rydex funds invest 5-10% of their cash (depending on the fund) in short futures and swap agreements, so they are investing on margin; the other 90% – 95% of cash is invested in short-term (less than or equal to 3 months) GSE discount notes earning 5%. Thus, the interest earned more than makes up for their fees, and he thinks their return beats the ETF, because in an ETF your brokerage account is unlikely to give you 5% interest on your cash. He told me to call back anytime I have further questions: 800-820-0888.

However, this chart comparing the ETF to the Rydex S&P500 inverse fund shows the ETF performed slightly better.

Also the minimum investment applies only if you are opening the account with Rydex. If you are buying the shares through your brokerage account, you can invest any amount you like.

I think I may have bought this too soon; the stock market rally is continuing. Only a few Dow stocks are past their 2000 highs, but since the Dow is weighted, the entire index is up just because a few of the 30 stocks are up. Maybe this will continue until after the election?

[stockstradr]

I’m replying to kick this very helpful (but old) thread, onto the piggington.com Active Forum Topics. I see a lot of great info on bear mutual funds and bear ETF’s in this thread, which have certainly revealed their value since mid-July, after which the markets fell ~10% to the Aug 15th low. My portfolio was 100% short the market on that ride down.

On Aug 15th, I figured the -340 point intraday put the DOW into a (temporarily) oversold position. I closed all my shorts that day, going to cash.

We have seen about a 5% up tick since then. I got lucky again.

Now my instincts are that it is again time to put chips back onto the table in short positions. However, I’m only going to put 25% of my portfolio back into short positions, because a nagging feeling says this market may have a wee bit more up tick before the chronic bear market resumes.

I’m going to throw that 25% at the PROSHARES TR ULTRASHT SP500 (Ticker: SDS), trying that ETF for the first time, based on some of your good advice. Here is why I’m not going back into the RYTPX (Rydex 2X Inverse Fund) I previously held:

I couldn’t sell RYTPX intraday on Aug 15th and take advantage of the minus 340 point intraday swing. RYTPX is a mutual fund so it sold at the end-of-day price. That cost me many thousands of dollars.

I believe ETF’s can be sold intraday, correct?

Anyway, so now you know my new bets on the market: I’m 75% cash, and I’m putting 25% into 2X inverse ETF tomorrow. If the next few business days show this up tick has run out of steam, I’m putting lots more chips onto the table in short positions again, but in positions less risky than a 2X inverse fund.

A recession is coming and this market is headed down another 10% to 20%. I’m certain of it.

[stockstradr]

I’m replying to kick this very helpful (but old) thread, onto the piggington.com Active Forum Topics. I see a lot of great info on bear mutual funds and bear ETF’s in this thread, which have certainly revealed their value since mid-July, after which the markets fell ~10% to the Aug 15th low. My portfolio was 100% short the market on that ride down.

On Aug 15th, I figured the -340 point intraday put the DOW into a (temporarily) oversold position. I closed all my shorts that day, going to cash.

We have seen about a 5% up tick since then. I got lucky again.

Now my instincts are that it is again time to put chips back onto the table in short positions. However, I’m only going to put 25% of my portfolio back into short positions, because a nagging feeling says this market may have a wee bit more up tick before the chronic bear market resumes.

I’m going to throw that 25% at the PROSHARES TR ULTRASHT SP500 (Ticker: SDS), trying that ETF for the first time, based on some of your good advice. Here is why I’m not going back into the RYTPX (Rydex 2X Inverse Fund) I previously held:

I couldn’t sell RYTPX intraday on Aug 15th and take advantage of the minus 340 point intraday swing. RYTPX is a mutual fund so it sold at the end-of-day price. That cost me many thousands of dollars.

I believe ETF’s can be sold intraday, correct?

Anyway, so now you know my new bets on the market: I’m 75% cash, and I’m putting 25% into 2X inverse ETF tomorrow. If the next few business days show this up tick has run out of steam, I’m putting lots more chips onto the table in short positions again, but in positions less risky than a 2X inverse fund.

A recession is coming and this market is headed down another 10% to 20%. I’m certain of it.

[stockstradr]

I’m replying to kick this very helpful (but old) thread, onto the piggington.com Active Forum Topics. I see a lot of great info on bear mutual funds and bear ETF’s in this thread, which have certainly revealed their value since mid-July, after which the markets fell ~10% to the Aug 15th low. My portfolio was 100% short the market on that ride down.

On Aug 15th, I figured the -340 point intraday put the DOW into a (temporarily) oversold position. I closed all my shorts that day, going to cash.

We have seen about a 5% up tick since then. I got lucky again.

Now my instincts are that it is again time to put chips back onto the table in short positions. However, I’m only going to put 25% of my portfolio back into short positions, because a nagging feeling says this market may have a wee bit more up tick before the chronic bear market resumes.

I’m going to throw that 25% at the PROSHARES TR ULTRASHT SP500 (Ticker: SDS), trying that ETF for the first time, based on some of your good advice. Here is why I’m not going back into the RYTPX (Rydex 2X Inverse Fund) I previously held:

I couldn’t sell RYTPX intraday on Aug 15th and take advantage of the minus 340 point intraday swing. RYTPX is a mutual fund so it sold at the end-of-day price. That cost me many thousands of dollars.

I believe ETF’s can be sold intraday, correct?

Anyway, so now you know my new bets on the market: I’m 75% cash, and I’m putting 25% into 2X inverse ETF tomorrow. If the next few business days show this up tick has run out of steam, I’m putting lots more chips onto the table in short positions again, but in positions less risky than a 2X inverse fund.

A recession is coming and this market is headed down another 10% to 20%. I’m certain of it.

[Author]

Posts