FYI: Most mutual funds use the straightforward strategy of buying securities they believe will rise in value and then selling them at a later time when (hopefully) they do. More complex strategies involve betting on prices falling instead of rising in value, or attempting to multiply the returns of an underlying index.
While most mutual funds hold some combination of stocks, bonds and cash, funds utilizing these inverse and leveraged strategies usually make heavy use of options or futures contracts instead. They’re helpful in that they are generally the easiest way to obtain long or short exposure to an entire index or sector without making a huge initial investment, but there can be significant costs involved in establishing positions. Many leveraged funds use short-term contracts, typically around one month until expiration, and must continue reestablishing those positions every month. This continuous buying pattern costs money.
Regards,
Ted
http://mutualfunds.com/education/how-short-selling-and-leverage-impact-mutual-funds-returns/
