Well, I would certainly question this combination:
"One [of his holdings] is a 'double inverse' fund that, on a daily basis, goes up twice as much as its stock benchmark goes down,"
"Rep. Paul appears to be a strict buy-and-hold investor who rarely trades."
If he handles the double inverse fund that way, then I would submit that in that part of his portfolio, he is screwing up, and must not have read the Prospectus, or the boldfaced cautions in the website description, or FINRA's warnings about leveraged ETFs.
The funds appear to be
Rydex Dynamic Nasdaq-100 2X (RYVYX)
Rydex Inverse S&P 500 Strategy (RYURX)
Rydex has these cautions
right on the web page describing the funds. The parts that I am quoting are parts they put in boldface:
These Funds should be utilized only by investors who (a) understand the risks associated with the use of leverage, (b) understand the consequences of seeking daily leveraged investment results, (c) understand the risk of shorting, and (d) intend to actively monitor and manage their investments....
Due to the compounding of daily returns, leveraged and inverse Funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period....
Investors should monitor their leveraged and inverse Funds’ holdings consistent with their strategies, as frequently as daily.
That's not a meaningless pro forma warning. Let's look at what happened from 5/9/2009 to today. During that time, an investment of $10,000 in Vanguard Five Hundred Index shrunk to $9,063, a loss of about $1,000. What might a foolish investor expect a buy-and-hold investment in the Rydex Inverse S&P 500 fund to do? Gain about $1,000, of course. What really happened?
Instead doing the opposite of the S&P 500 fund and gaining $1,000, it lost $1,644--more
than the S&P 500 fund lost.
These inverse and leveraged funds are no good for buy-and-hold investors. Just as the fund companies say, they are for investors who intend to "monitor their leveraged and inverse Funds’ holdings consistent with their strategies, as frequently as daily." That is to say, market timers.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.