WSJ:Price Charts Can Mislead

By SIMON CONSTABLE

Some holiday traditions are worth skipping. For instance, take the one when you note with horror that the price of your mutual fund has plunged for no apparent reason.

"You hear that a lot around December," says Russel Kinnel, director of mutual-fund research at Morningstar Inc. "People tend to freak out."

If the battering is limited to your fund, chances are the meltdown is illusory: This is the time of year when many funds pay out capital gains they've racked up by selling portfolio securities. When the payout is big, that immediately leads to a big drop in the fund's price, or net asset value. The larger the payout, the bigger the swoon.

Read more here.
Post a Comment