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.