I look forward to a stimulating discussion of the Potomac Funds and enhanced index investing. In addition, Potomac Funds allows investors to reallocate their investment between any of the Potomac Funds, including a government money market fund, as often as they deem necessary without limitation or incurring a fee. Simply stated, the goal of an enhanced index fund is to outperform the index it is tracking. Some funds attempt to achieve this by increasing the weights of certain favorite stocks in the index while decreasing the weights of other stocks.
Some funds use a form of derivative and short term bonds in their attempt to outperform the market.
With a beta 1.25 strategy, the fund attempts to outperform the underlying index by 25 percent. The statistic that is thrown out about the preceding decade was that 90 percent of all actively-managed funds in the 1990s failed to meet or exceed the return of an index fund. I've never done any research to verify that saying, but it strikes me, given all the attention that index funds have gained in the last several years, that if your investment can return as good a return as the index, you're doing a pretty good job. First off, to address the question of the funds available for a one-year investment, I firmly believe that those funds should be invested in a money market fund or equivalent vehicle. As to the funds being invested for retirement purposes, there are a whole host of investment vehicles available.