|
|
|
Potential Benefits and Risks
In addition to the hedging benefit, futures provide an opportunity for speculation, or investing in higher-risk vehicles in an attempt to profit from an anticipated price movement.¹ They are also popular because of their trading efficiency—that is, the transaction costs are generally lower than the costs of trading the underlying instruments. Once available primarily to the institutional marketplace, there are many products today that give individual investors direct, relatively inexpensive access to futures. While they are risky as stand-alone investments, futures can help manage risk within a diversified² portfolio.
Benefits |
Risks |
Potential to add leverage³ to a
portfolio
|
May be affected by variables such as weather, livestock disease,
embargoes, tariffs and international
economic, political and regulatory
developments. In addition, many of
the underlying global investments
are risky |
| Non-correlation (that is, they may
move in the opposite direction) to
equities and bonds |
Potential loss if you’re on the
opposite side of the price movement |
| Potentially high volatility (or wide price swings), which can
provide opportunity if you are on
the profitable side of the contract |
High volatility, which can provide
opportunity as well as increase risk |
| Can perform well in both rising
and falling markets |
Challenging to be in the right
market at the right time |
 
|
|
¹ When investing in speculative investments, investors must be willing to assume potentially greater-than-average market volatility and investment risk.
² Diversification neither assures a profit nor eliminates the risk of experiencing investment losses.
³ Leverage is defined as using given resources in such a way that the potential positive or negative outcome is magnified. The use of leverage may not be suitable for all investors.
This educational piece is not intended to be comprehensive. Before investing in managed futures, be sure to discuss them with your financial advisor to make sure they are appropriate for your time horizon, risk tolerance and objectives. Investors should be aware that there are risks, special costs and requirements associated with financial futures and that they may not be appropriate for all investors. When owning futures, investors should consider the impact and risk of maintaining a margin account. Margin is defined as borrowing money from a broker/dealer to purchase securities. It is sometimes called “buying on margin.” Should an adverse price movement affect your securities, a margin call will be issued, which demands additional investment to cover the loss. Failure to meet a margin call can result in losing more than your original investment. Futures should be regarded as short-term trading vehicles and should be regarded as inappropriate for anyone who is unable or unwilling on short notice to access other financial assets in order to meet margin calls on open futures positions.
The information provided here is intended to be general in nature and should not be construed as investment advice or a recommendation of any specific security or strategy.
|
 |
©2010 Rydex Distributors, Inc. All Rights Reserved.
 Not FDIC Insured No Bank Guarantee May Lose Value
For more complete information regarding the funds click here for a prospectus. Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. The fund’s prospectus contains this and other information about the fund. Read the prospectus carefully before you invest or send money.
The funds are distributed by Rydex Distributors, Inc. (RDI). Security Global InvestorsSM is the investment advisory arm of Security Benefit Corporation (Security Benefit). Security Global Investors consists of Security Global Investors, LLC, Security Investors, LLC and Rydex Investments. Rydex Investments is the primary business name for PADCO Advisors, Inc. and PADCO Advisors II, Inc. SGI and RDI are affiliates and are subsidiaries of Security Benefit.
|
|
|
|
Print this page
Email this page
