Chart Reading

As an investor you will want to check out any equity before you buy it. Many investors go to Morningstar that is one of the largest providers of mutual fund information in the world. It is assumed that their information is correct. After all that is what you are paying for.

Recently the SEC (Securities and Exchange Commission) called them on the carpet for not correcting an error within a reasonable time (whatever that is according to the SEC). Everyone makes errors and this was no big deal.

It seems that when you went to their site and drew up a chart or asked for statistics on Rock Canyon Top Flight mutual fund it failed to notify the potential buyer that the fund had issued a very large dividend of approximately 25% and the NAV (Net Asset Value) dropped from $15 to $11 to reflect the $4.00 dividend.

It seems that when you ask for a chart of this fund on MarketWatch, Yahoo, TheStreet or Bloomberg that they only post the NAV and do not make any adjustment for the dividend or capital gains distributions. When you look at the chart it looks like the fund fell out of bed. Because I look at so many charts I knew immediately that this was a distribution and not some calamity. To be sure it is very simple to call the fund to verify this.

Every fund that makes dividend and capital gains distributions usually does so in December, some in November and very few at other times during the year.

Some nitpicker called the SEC and made a complaint about Morningstar. Not that I am a big fan of them (in fact I think their reports are worthless) they get their price information from other sources such as the above. If you are not familiar with the requirement of mutual funds to disburse their profit before year end you might be fooled when you see the price suddenly drop.

This is important for potential investors. I caution everyone to get a chart of at least a one year performance of any mutual fund before buying it. It is better to go back to year 2000 to see if the fund manager was able to keep from losing money during the last 4 years. Almost none of them could so they talk about how they did better than the S&P500 Index which had a huge loss. Don't fall for that one.

Once again I caution that any purchase should have an exit plan. One of the basic rules of investing is never to lose a lot if you are wrong. Small losses will not ruin your portfolio, but big losses can ruin your retirement. Set your loss limit and stick with it. For some it might be 5%, others 10% or more, but have an exit strategy or you will go broke.

The secret of the stock market that Wall Street does not want you to know is that success in the market is not buying it is selling.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

[email protected]; 1-888-345-7870

In The News:


The Secret to More Winning Trades is as Simple as Avoiding This Common Mistake

If you're a normal human being, your need to feel... Read More

Stocks Options Trading

Let's assume that you want to make some serious money... Read More

Leverage - Margin Debt

What is leverage?Here is a definition of leverage from an... Read More

Social Insecurity

Just about everything you have been told about Social Security... Read More

The Problem With Hedge Funds

Are hedge funds a suitable investment for you? Hedge funds... Read More

Fools Gold

The stock market has been in an up trend for... Read More

How to Short Stocks? How to Make Money when Your Stocks Go Down by Shorting

The stock market can present you with a lot of... Read More

Precision Money Management

This article describes the model of a natural relationship between... Read More

Pension Plans

If you have a pension plan at work you will... Read More

Stock Trading - Daddy, Why Arent We Rich?

One Saturday morning, while he was sitting at his computer... Read More

The Stock Market - How Just One Question Will Tell You All You Need To Know About Your Stock Broker

Last time we looked at the real performance of the... Read More

E-mini Day Trading - Day Trading for Beginners - Stock Market Timing Software

I mean it when I say that. While plastic silverware... Read More

Pamplona, the Wild Investment Bulls

You remember (they show it on TV every year) the... Read More

An Old Proverb for Investing

"If you don't know where you are going, any road... Read More

What the SEC Really Thinks About Mutual Funds!

Let's go into the details of why non-indexed mutual funds... Read More

More Window Dressing

Two weeks ago I wrote about what the Securities and... Read More

What Our Investment Advisor Wont Say Off The Bat

Most advisors will tell you they can beat the market.... Read More

Inertia

One of the basic laws of physics is that a... Read More

Where Is The Rabbit?

We need a rabbit!This was a pretty horrible week for... Read More

The Stock Market is a Roller Coaster: Prepare for the Ups and Downs

IT'S REMINISCENT OF THE OLD children's tale about an old... Read More

Shorting Stocks ? The Basics, Part I of II

What does it mean to short a stock?This means that... Read More

Trapeze Artist - Swinging with the Stock Market

When we go to the circus we see a trapeze... Read More

Duck

Duck! No I don't mean a quack, quack. I meant... Read More

Intervention

Intervention. Now don't let that big word scare you. The... Read More

How to Read an Annual Report

Every publicly traded company is required by the SEC(Securities and... Read More