Access to Alternative Investments | Alternative Investments | GetAlts.com | Rydex

Access to Alts

Mutual funds and ETFs may provide a convenient, less expensive and more transparent vehicle for individual investors to gain exposure to alternatives.

Characteristics of mutual funds and ETFs

Access
ETFs and mutual funds are available to the general public, and though there are usually certain investment minimums set by the fund, these are typically less than hedge funds. ETFs must be bought through a broker, while mutual funds can be bought directly from the fund company or from a broker.

Fees
Mutual funds, on average, have an annual expense of 0.99%¹, while ETFs have annual expenses that average 0.57%², plus any brokerage fees. Certain fees for both ETFs and mutual funds are regulated by federal law.

Investments
Mutual funds and ETFs generally make direct investments in stocks, bonds and other securities. Use of leverage, shorting and derivatives is limited by regulation.

Liquidity
Mutual funds and ETFs offer the opportunity to trade in and out of shares on a daily basis.

Performance
The goal is for performance to correspond to a certain index or to provide alpha. Both ETFs and mutual funds typically make performance information available daily.

As with any investment, when investing in any mutual fund or ETF, it is important to thoroughly investigate and understand the investment objectives, strategies, fees, risks and expenses. All of this information is available in the prospectus. Investors should also be familiar with the fund manager's track record and reputation.

When investing, it is important to have realistic expectations. It is tempting to think that alternatives will guarantee enhanced results, but this is not necessarily the case. As with any investment, there is the potential for up and down days.

Pricing
Most mutual funds are priced once a day, giving investors a clear value of their investment. ETFs are priced throughout the day on an exchange just like a stock, though their value may trade above or below the value of the underlying portfolio.

Regulation
Mutual funds and ETFs must register with the SEC, which actively regulates their structure and operation. All funds must publish a prospectus and Statement of Additional Information (SAI) containing specific information about the fund's management, holdings, fees and expenses and providing transparency to investors.

Taxes
With a mutual fund, investors pay taxes on any ordinary dividends, personal capital gains when you sell your shares and possibly on the fund's capital gains. An ETF's taxes works similarly to stocks. Investors pay income tax on any dividends and interest and pay capital gains for any profits when the ETF is sold.

Transparency
ETFs generally provide their holdings daily, while mutual funds do so at least quarterly.

¹ Source: 2009 Investment Company Fact Book
² Source: Morningstar, as of 12/31/2009

The alternatives strategies and asset classes mentioned are not suitable for all investors. Many alternative strategies use sophisticated and aggressive investment techniques such as leveraging, short selling and derivatives. The more you invest in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. The use of short selling involves increased risks and costs. You risk paying more for a security than you received from its sale. Theoretically, stocks sold short have the risk of unlimited losses. The use of derivatives such as futures, options and swap agreements may expose an investment to additional risks that it would not be subject to if you invested directly in the securities underlying those derivatives. Additionally, certain alternative strategies tied to hard assets such as commodities, currencies and real estate, may be subject to greater volatility as they may be affected by overall market movements, changes in interest rates or factors affecting a particular industry, commodity or currency, -such as droughts, floods, weather, livestock disease, embargos, tariffs and international economic, political and regulatory developments. No investment strategy can guarantee a return in a declining market. Additionally, an investor could lose all or a substantial amount of their investment. For more information about these strategies and their risks please consult your financial advisor.

This material is not intended to be a comprehensive overview of the subject matters discussed. It is intended to be general in nature and should not be construed as investment advice or a recommendation of any specific security or strategy. Before investing in any of the investment products or strategies discussed, consult with your financial advisor to determine if they are appropriate for your objectives, risk tolerance, income level and investing time horizon.

Rydex SGI offers funds with investment strategies similar to those referenced on GetAlts.com.

Read the fund's prospectus and summary prospectus (if available) carefully before investing. It contains the fund's investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at www.rydex-sgi.com or call 800.820.0888.

Rydex SGI Funds are distributed by Rydex Distributors, LLC (RDL). Security Global Investors^SM 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 Rydex Advisors, LLC and Rydex Advisors II, LLC. Security Global Investors and RDL are affiliates and subsidiaries of Security Benefit, which is wholly owned by Guggenheim SBC Holdings, LLC, a special purpose entity managed by Guggenheim Partners, LLC, a diversified financial services firm with more than $100 billion in assets under supervision.