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Nautilus Inc. Message Board

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  • astral_tsar astral_tsar Oct 17, 2008 5:36 PM Flag

    One more time - Alert

    Hi, goodvibe. I'm a very old timer on this board with no opinion about whether the market is going up or down, but a warning about short funds.

    Be careful. Short funds work in a very squirrely way. It's fundamental to how NAV is calculated.. You can get a situation where the stuff they're shorting goes up, then comes back down to the same spot, but you've lost a bunch of money. For a short fund NAV depends not only on changes in the prices of the underlying securities, but on changes in the amount of money in the fund.

    This doesn't happen in a long fund, but short funds reward some shareholders at the expense of others in a way that is tricky to predict (unless you know not only how the market will move but how shareholders will move in and out of your fund).

    Live it, learn it, believe it.

    Anyway, good luck.

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