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

al@mutualfundstrategy.com; 1-888-345-7870

---

A Personal Stock Market Investment Philosophy

∙ Make every investment in the stock market a long-term... Read More

Municipal Bonds

Because there are so many stocks that are NOT paying... Read More

Never Fall In Love!

Recently I watched my favorite football team lose a vital... Read More

The Club

Yesterday I received my monthly issue of MONEY magazine. This... Read More

How to Evaluate Load vs. No Load Mutual Funds

If you have been dealing with mutual funds for any... Read More

Eternal Sunshine

There is a current movie entitled "Eternal Sunshine of the... Read More

Mutual Funds: The Modern Den of Thieves!

Mutual funds were created with the idea that one person... Read More

Oil Stocks As A Long Term Investment

The demand for world oil is increasing while world reserves... Read More

How Eating Bitumen Made Me a Better Trader

Trading is a fascinating activity.There are so many layers to... Read More

The I Word is Coming to a Town Near You

Hello Inflation, it has been awhile, I see you on... Read More

Why Change Funds?

On November 17 I bought 7 different mutual funds and... Read More

Understanding a Stocks PEG Ratio

A PEG ratio cannot be used alone but is a... Read More

Trading Systems

To become a successful trader you must have some kind... Read More

The Stock Market Investor?s Worst Enemy

Every stock market investor faces one primal enemy. An enemy... Read More

Maximizing a Stock Market Investment

Maximizing a stock market investmentThere are several factors an investor... Read More

On Line Stock Trading: Small Cap & Micro Stocks Go Up and Down - How Can You Profit?

Success in small cap & micro cap stock trading like... Read More

Do You Know What is the Single MOST Critical Mistake in Trading the Stock Market??

Well maybe that's overstating it a little, but it's certainly... Read More

Whos Calling?

Its dinnertime and the phone rings. It's Joe Noname with... Read More

Performance Funds

Mutual funds are doing more and more to discourage investors... Read More

Emotional Involvement

I'll bet with almost anyone that has stocks or mutual... Read More

Hedge Funds

You read and hear a lot about hedge funds. Unfortunately,... Read More

How (NOT) to Buy Mutual Funds

When it comes to mutual funds, there is a lot... Read More

Tips to Finding Other People?s Simple Trading Plans

Did you know you can make money (and a lot... Read More

Some Good News for A Change

Before we get into all the good news out there,... Read More

Buy and Hold Investment Strategy

"Buy and hold" is one of the most heralded investment... Read More

Buy Low - Sell High

Now where have I heard that before? I know. It... 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

The Next Bull Market

We are already in it, but you can't see it.... Read More

Stock Market System ... ONLINE STOCK TRADING ... Beyond Day Trading Basics & Tips

Day trading is all about making buy and sell decisions.... Read More

Keep Your Profits

It looks like we have now entered a new bull... Read More

Traders, Defend Against the Dreaded Death Spiral.

It has often been said that there is only two... Read More

How To Pick A Mutual Fund

Mutual funds by definition are a mixed bag of stocks,... Read More

Its A Duck

If it walks like a duck, quacks like a duck... Read More