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:

What Is a Mutual Fund?  NextAdvisor

The Big Bad Bear

The big bad bear is stirring again. So far he... Read More

Buying New Issues

Has your broker been calling you recently with the "great... Read More

Starbucks Stock is Up

Starbucks earnings are up again and so is their stock... Read More

Bottoms Ups

If you have talked to a stock broker or financial... Read More

Understanding the Bulls and the Bears

If you've ever flipped on the television to CNN Financial... Read More

Advisory News Letters

Several times each month I am solicited by various market... Read More

War Market

There is no question that the stock market is being... Read More

Dont Buy Stocks based on P/E Ratio alone

I use the P/E ratio as a secondary indicator for... Read More

Market Timing?

The recent criminal fiasco in the mutual fund industry is... Read More

Why This Bear?

People are constantly asking me why is the stock market... Read More

Investment Clubs

Because you don't feel too sure about which stock or... Read More

Trading Stocks ?Never Forget About A Past Trade

We all know that emotions control every decision that an... Read More

The Top 10 Reasons to Invest in Mutual Funds

Everyone who follows the financial news has heard of mutual... Read More

Wall Street Paradigm

In 1960 an engineer working for a watch company in... Read More

Smart Day Trading Strategies to Help You Make Money in the Stock Market

Stock trading can be a very profitable activity. You can... Read More

A Funny Thing Happened on the Way to the Stock Market

On the 40 year journey through the turmoil of a... Read More

Trading Tips No 8: Picking the Best Stock Market Price

Carefully thinking through your goal as a trader is of... Read More

Lies, Damn Lies and Mutual Fund Returns

How many times has this happened to you? You're at... Read More

Finding A Good Stock

One of the things people are always asking me is... Read More

Stock Investment Advice

Stock investment advice is easy to find. Do you get... Read More

Stock Market Investments

If there is one term over-used when talking about making... Read More

Shorting Stocks ? The Basics, Part I of II

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

Dividends

When is a dividend not a dividend?The latest thing "conservative"... Read More

Rebalance And Diversify

The stock market has not been very kind to your... Read More

A Stock Market Investment Strategy

I feel that an investment strategy in the stock market... Read More