How ProFunds are different from conventional index funds
Many ProFunds seek to provide a multiple, the inverse, or a multiple of the inverse of the return of a benchmark. There are factors to consider, such as leverage and compounding, when purchasing ProFunds.
Leveraged ProFunds, such as Ultra ProFunds, UltraSector ProFunds and some non-equity ProFunds seek to magnify index performance by using leverage. Leverage offers a means of magnifying market movements into larger changes in an investment's value and provides greater investment exposure than an unleveraged investment. Leverage also should cause a fund to lose more money in market environments adverse to its daily investment objective than a fund that does not employ leverage.
Inverse ProFunds seek to provide the inverse or a multiple of the inverse of the performance of a benchmark. They use derivatives to seek short exposure, which may increase volatility and decrease performance under certain market conditions.
Special risks involved with ProFunds
The leverage techniques and derivatives used in some ProFunds magnify gains and losses and result in greater volatility than conventional index funds. More details about ProFunds' risks can be found in the summary and full prospectuses.
What ProFunds are available
1 Study by Hill and Foster of ProShare Advisors, published in September/October 2009 issue of Journal of Indexes.
2 Path Dependence of Leveraged ETF Returns, Marco Avellanda & Stanley Zhang. New York University, May 19, 2009. Rebalancing Leveraged and Inverse Funds, Joanne M. Hill & Solomon G. Teller, Institutional Investor Journals, 8th Annual ETF Guide, October 2009.