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Question Abt Leveraged Mutual Funds

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Money Talk > Investing, Stocks and Bonds

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The Rich Greek
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Question Abt Leveraged Mutual Funds  Reply with quote  

This is my first post and hope that you guys can help me. I am thinking abt getting into the Rydex Monthly Rebal NASDAQ-100®2xStratFd for a small portion of my investment portfolio. It will be in a taxable account. Since the funds holdings have a turnover rate of 500 %, I was wondering what the possible tax ramifications could be as it sounds like there would be a lot of short term gains.

Tnx in advance for any info/assistance you can provide.

The Rich Greek
Post Mon Aug 21, 2017 6:45 am
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You're correct about the taxes - and the cost-of-money is another big factor, you must pay for the use of the 'other half' of the money. And pay for both sides when the market goes down.
The leveraged funds all follow the same concept - ie, they use a common Index - eg, the SP500 and borrow to leverage it, usually 2X, some are 3X. The Leveraged NASDAQ 2X is as good as any. I prefer the SSO 2X, just because I'm more comfortable with the S&P500 Index.

But I prefer to do my own leveraging - I borrow on a house, or on a car - and then invest the borrowed money in the SP500 Index. That way my borrowed money and my investment are not tied together, the Index can go up/down and I'm not going to get margin calls or pay toxic interest, all I need to do is make the monthly payments no matter what the market does. And the rates are in the 2% to 5% range, no 12% and 14% loans.
Post Mon Aug 21, 2017 1:32 pm
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