Published:
July 27, 2007
Rising Rates Opportunity ProFund (RRPIX, $20.65) --
When most bond funds are losing ground, RRPIX actually makes
money. This inverse bond fund tracks the 30-year U.S. Treasury
yield, which moves inversely to the price. When the price of the
30-year Treasury falls, the Treasury yield rises -- and so does
the value of this fund.
And besides capital gains, RRPIX also offers an above-average
dividend yield. At year-end 2006, the fund paid out $1.37 in
interest income, which equates to a yield of 6.6% at today's
price. However, a fairly steep expense ratio of 1.43% will trim
your total returns.
If long-term interest rates continue rising, then so will the
value of your investment in this fund. With the use of leverage,
the fund is designed to advance +1.25% on a day when the 30-year
Treasury declines in price by -1.00%.
But the reverse is also true. The fund could decline -1.25% when
the 30-year Treasury goes up +1.00%. In fact, since its
inception in mid-2002, rates have trended lower and the fund has
returned a disappointing -5% a year.
Given that the dividend is taxable as ordinary income, the fund
is suitable for a tax-sheltered portfolio -- and a fairly
substantial portfolio at that. A minimum investment of $15,000
is required for an individual investor.
Action To Take ---> Considering how
unpredictable interest rate swings can be, we wouldn't recommend
an investor take a large position in this fund. Still, the fund
could serve as a useful hedge to protect the value of your bonds
and other fixed income investments against a continued rise in
interest rates.
Carla Pasternak
Editor
High-Yield
Investing
About High-Yield Investing
High-Yield Investing is
a monthly investment newsletter that brings you a wealth of information on the
market's leading income stocks and funds, as well as a host of relatively
unknown investment options that you probably won't find coverage of anywhere
else. Many
of these securities provide investors with annual dividend yields of 10%, 15%,
even 20% or more. The newsletter not only provides subscribers with
investing ideas that produce incredibly high dividend yields, but the kicker is
that these high-yield investments have also consistently outperformed the major
market averages. (Learn
More)
About Carla Pasternak
Editor of StreetAuthority.com's High-Yield Investing newsletter since its
inception in May 2004, Carla Pasternak draws on a variety of financial
backgrounds to make profitable calls on income-generating stocks for her
readers.
Carla has been employed in the investment industry for more than two decades.
In addition to her work as a writer for several nationally recognized financial
publishers, her previous experience includes a position as president of a
well-respected investor relations firm. She has also been writing shareholder
reports for public companies since 1980.
A highly successful investment analyst, Carla specializes in high-yield,
income-paying stocks. In that pursuit, she's always mindful to select companies
that not only pay rich dividends, but that also deliver strong long-term capital
gains. Furthermore, Carla's experience in writing SEC filings gives her the
added insight required for her to truly understand a company's current and
future financial health.
On the educational front, Carla holds BA, MA, MBA and Ph.D. degrees. When
she's not watching the market, she's teaching business courses at the college
level and managing millions of dollars in portfolio assets.
To learn more about Carla Pasternak's premium income investing newsletter -- High-Yield
Investing -- please visit
this link.
|
