Stock Chart Reading
As an investor you will want to check
out any equity before you buy it. Many investors
go to Morningstar which 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.
When you ask for a chart of this fund
on MarketWatch, Yahoo, TheStreet or Bloomberg they
only post the NAV and do not make any adjustment
for the dividend or capital gains distributions.
Looking at the chart it appears 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. It is best to call the fund to
verify this.
Most funds that make dividend and capital gains
distributions usually do 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 on
the Internet of at least a one year performance of
any mutual fund before buying. 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 bamboozle
about how they did better than the S&P500 Index
which had a huge loss of 50% and remains down 25%
from those highs at this time. 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 (5%, 10% or ?) and stick with it.
Charts can help you with
buying/selling decisions, but check out their
accuracy as charting is not an exact science.
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.
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