Q: A friend recently told me about a fund company called Rydex that is offering funds that "short" certain indexes, such as the S&P...

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Q: A friend recently told me about a fund company called Rydex that is offering funds that “short” certain indexes, such as the S&P 500 and the Russell 2000. How do these funds work? Would you recommend them in general?

— B.J., Dallas

A: Rydex is an interesting fund company. It offers a number of funds that attempt to provide inverse but equal performance to major market indexes.

Rydex Ursa, for instance, attempts to provide the same return as the S&P 500, but short. It lost money relentlessly in the late ’90s bull market but, as expected, made money in the bear market of 2000, 2001 and 2002.

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The fund can achieve its goal — to perform the opposite of its target index — by short-selling individual securities or trading in futures contracts and options on futures contracts.

Other Rydex funds have goals of providing inverse performance of other indexes. Rydex Inverse Small-Cap, for instance, is a negative duplicate of the Russell 2000 index, while Inverse Mid-Cap is a negative duplicate of the S&P 400 Mid-Cap index.

Rydex Dynamic Dow is yet more aggressive, attempting to provide twice the inverse performance of the Dow 30 stocks. You can also make an inverse bet on interest rates through the Rydex Juno fund, which attempts to move in opposition to long-term Treasury bonds.

It has never been a good idea to bet against America and its stock market, so these funds aren’t exactly taking the world by storm.

Juno, a tool for making interest-rate bets, has gathered the most assets, while the others lag significantly. Few people are prepared for the stress of negative bets, so most should ignore these funds.

For most of us, the most interesting fund at Rydex will be its S&P Equal Weight fund. Unlike other S&P 500 index funds, this $700 million fund invests equal amounts in each of the 500 stocks in the S&P 500 index.

In 2004, the fund returned 16.5 percent to investors, beating the conventional index by a whopping 5.6 percentage points.

Some think that equal weighting eliminates the systematic overinvestment in overvalued stocks that can occur with market capitalization-based indexes.

Equal weighting also means the fund is less concentrated in a few mega-stocks than the S&P 500 index is. General Electric, the most valuable company in the S&P 500, for instance, accounts for 3.41 percent of the entire index, and the largest 25 stocks account for an incredible 46 percent.

Questions about personal finance and investments may be sent to Scott Burns at The Dallas Morning News, P.O. Box 655237, Dallas, TX 75265; by fax at 214-977-8776; or by e-mail at scott@scottburns.com. Questions of general interest will be answered in future columns.