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Is Rydex NASDAQ-100 2X Strategy A (RYVLX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research

Index fund seekers should consider taking a look at Rydex NASDAQ-100 2X Strategy A (RYVLX). RYVLX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

History of Fund/Manager

Rydex is based in Topeka, KS, and is the manager of RYVLX. Since Rydex NASDAQ-100 2X Strategy A made its debut in June of 2005, RYVLX has garnered more than $39.77 million in assets. Michael P. Byrum is the fund's current manager and has held that role since June of 2005.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. RYVLX has a 5-year annualized total return of 25.1% and it sits in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 34.66%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of RYVLX over the past three years is 30.26% compared to the category average of 8.85%. Looking at the past 5 years, the fund's standard deviation is 30.92% compared to the category average of 9.2%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment. RYVLX lost 80.77% in the most recent bear market and underperformed comparable funds by 38%. These results could imply that the fund is a worse choice than its peers during a sliding market environment.

Nevertheless, with a 5-year beta of 2.39, the fund is likely to be more volatile than the market average. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. Over the past 5 years, the fund has a positive alpha of 2.55. This means that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Exploring the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is mostly on equities that are traded in the United States.

Currently, this mutual fund is holding 95.17% stock in stocks, with an average market capitalization of $381.09 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Other
  3. Retail Trade

With turnover at about 113%, this fund makes more trades per year than the comparable average.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, RYVLX is a load fund. It has an expense ratio of 1.89% compared to the category average of 0.86%. So, RYVLX is actually more expensive than its peers from a cost perspective.

Investors should also note that the minimum initial investment for the product is $2,500 and that each subsequent investment has no minimum amount.

Bottom Line

Overall, Rydex NASDAQ-100 2X Strategy A ( RYVLX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and higher fees, Rydex NASDAQ-100 2X Strategy A ( RYVLX ) looks like a good potential choice for investors right now.

Your research on the Index segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.


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