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Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: Bernie Goldberg who wrote (14713)	2/2/2001 2:01:48 PM
From: Todd Reichardt	Read Replies (1) \| Respond to of 18928

Hi Bernie, ProFunds gives us the option to switch in and out on a daily basis without incurring additional fees or commissions. The high expenses come partially from the turnover this causes. In some sense, comparing ProFunds S&P500 index fund to another fund that doesn't give you this option is not a fair comparison. The 4-5% discrepancy is very significant if you buy and then hold for a long period of time. If this is how you use the fund, perhaps you would be better off in a different fund. However, if you trade in and out, it becomes less significant. The S&P500 moved on average about 1%/day last year, the 5% discrepancy works out to 0.02%/day. With a short term horizon other things become much more important, for instance, the daily correlation of the fund to the index can be really important (much more than 0.02%/day). Additionally, if you think about the 4-5% as the cost for being able to make ~250 S&P500 trades per year, it is a very small cost compared to other vehicles which would give you slippage on bid/ask and generate commissions. While on first cut 4-5% sounds high, it is really very cost effective for short term traders. Todd