They are also designed to mimic their benchmarks daily, meaning they could be used by market timers as well as long-term investors. Even manager Mike Byrum concedes that cash often flows in and out of the fund at the wrong time. The problem here is expenses. The ultra-indexing idea is much better for owners of the fund complex than it is for most investors. Also subtracted from performance at these funds are unusually high transaction costs, which aren't part of the expense ratio.
Most index funds discourage big swings in assets to keep transaction costs low.
It doesn't cost them anything. Other shareholders pay the tab. And whereas index funds are usually very tax efficient, these supercharged index funds have a tax time bomb buried within them. That being said, some people have the stomach to buy these supercharged funds and hold them through the hard times. Mutual Funds Archives See our archives for more mutual fund insight.