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Recently, I've started tracking daily all of the funds that my 401k plan has and over the past 4 months I have yet to see a fund move by this much in one day. What I'd really like to know is how is it possible for 2 mutual funds (a small cap and medium cap both from the same fund company) to lose 6-7% today when the top ten individual stock holdings of each fund which account for 25% and 36% of the total holdings have a weighted change of 0.57% and -0.03% today respectively? These funds have never given dividends, especially considering they're investing in small and medium cap, so the price adjustment is not due to that.

I find this very difficult to believe that 2 funds can lose this much aggregately coming from it's lower holdings. Is this reasonable? Is there an explanation for this? Do I have a misconception of how a fund's price is set and it is not a direct relationship of the prices of it's holdings?

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now if a distribution can reduce the NAV (and show a drop after distribution), would the historical stock charts be adju... (more)

dpid (Dec. 19, 2006 @ 11:24p) |

I check my balance everyday since I work at the brokerage house. I wasn't afraid at all when the market was dropping in... (more)

Ivanist (Dec. 19, 2006 @ 11:53p) |

VWIGX (Vanguard International Growth)<br>Tue Dec 19 2006<br>Open 26.09<br>Close 23.58<br>Change -2.51 (-9.62%)<br>Div 0.... (more)

psychtobe (Dec. 20, 2006 @ 12:03a) |

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I'd bet there was a distribution of capital gains (most likely given this is the normal time of year for that to occur). Either they pay out in cash, or more likely in the case of a retirement account you have them reinvest. In reinvestment your number of shares will increase, while the value of each shares decreases by the amount of the dividend. Even though the value of the shares drops you didn't lose 6-7%. You should be able to check your number of shares owned or account activity to confirm this.

hair said: [Q]I'd bet there was a distribution of capital gains (most likely given this is the normal time of year for that to occur). Either they pay out in cash, or more likely in the case of a retirement account you have them reinvest. In reinvestment your number of shares will increase, while the value of each shares decreases by the amount of the dividend. Even though the value of the shares drops you didn't lose 6-7%. You should be able to check your number of shares owned or account activity to confirm this.

But I checked the total balance of the account today and there's a huge chunk subtracted from the balance going from yesterday to today. There have been no recorded transactions for today either, so the number of my shares hasn't changed. Does the redistribution happen across several days? It's sort of difficult to trace the same event happening last year because our 401k provider only keeps a viewable history of exactly one year. I'm hoping this is just a weird artifact of me watching the balance daily.

TheXung said: [Q]hair said: [Q]I'd bet there was a distribution of capital gains (most likely given this is the normal time of year for that to occur). Either they pay out in cash, or more likely in the case of a retirement account you have them reinvest. In reinvestment your number of shares will increase, while the value of each shares decreases by the amount of the dividend. Even though the value of the shares drops you didn't lose 6-7%. You should be able to check your number of shares owned or account activity to confirm this.

But I checked the total balance of the account today and there's a huge chunk subtracted from the balance going from yesterday to today. There have been no recorded transactions for today either, so the number of my shares hasn't changed. Does the redistribution happen across several days? It's sort of difficult to trace the same event happening last year because our 401k provider only keeps a viewable history of exactly one year. I'm hoping this is just a weird artifact of me watching the balance daily.

Depending on the mutual fund companies, some get reported the next day while others could take a week. The American Funds that I own take a few days to hit my accounts. Don't worry, you will see the distributions next week!

It is most likely due to dividend distribution. For example JMCVX dropped $2.00 (7.68%) today. Google Janus Fund Dividend and you will find that Janus equity and income funds distributions were paid on December 15, 2006 to shareholders of record as of December 14, 2006. Typically it takes a few days for your broker company to report it on your account. The total distribution for JMCVX is $1.99 per share. So in fact it (edit) lost one cent today.

Check out the website of the mutual fund company. They'll post this info.

For example:
Fidelity's Schedule
Vanguard's Schedule

FastFood said: [Q]It is most like due to dividend distribution. For example JMCVX dropped $2.00 (7.68%) today. Google Janus Fund Dividend and you will find that Janus equity and income funds distributions were paid on December 15, 2006 to shareholders of record as of December 14, 2006. Typically it takes a few days for your broker company to report it on your account. The total distribution for JMCVX is $1.99 per share. So in fact it raised one cent today.

If it lost $2.00 (7.68%), and it paid $1.99 per share... It looks to me like you lost 1 cent, not gained.

mjohns2 said: [Q]If it lost $2.00 (7.68%), and it paid $1.99 per share... It looks to me like you lost 1 cent, not gained.
Ouch! You are right. <img src="i/expressions/face-icon-small-smile.gif" border=0>

OP--why would you bother watching performance daily on all the funds? What a waste of your life.

My friend was freaking out when his (broad equity)fund dropped 20% in one day. It was just a distribution, which showed up in his account after a day or two. Quite a scare for him though.

December is the month when most mutual funds have their capital gain distributions....Op, weren't you aware of this? Has nothing to do with whether it's a dividend paying fund or not....

I have a Royce Small Cap Fund (excellent performer, by the way)..and last week it paid out it's annual distribution...so share price dropped quite a bit...and they take a couple of days before they automatically re-invested it in more shares for me (the way i have it set-up on my account...i would assume you have yours set-up the same?) Once the shares were re-invested, the balance came right back (with my additional shares listed, of course).....

You didn't lose anything...you simply gained more shares (after the distribution)....

Funds are paying their capital gain dist this month. From what I've heard these will be the largest gains in 4 or 5 years. So a drop that large in one day would almost have to be from that.

In one day I saw my account drop huge (last week). Called my advisor and he told me what I wrote to you. Next day everything looked fine (even better than the day before the drop).

Don't sweat it, and don't check your portfolio balance everyday or you'll go insane. Check it once a month and you'll probably be pleasantly surprised.

<img src="i/expressions/face-icon-small-smile.gif" border=0>

yes, that is good advice from jimmy...with the ups and down in the market during the month..do not look at it every day...do you want all your hair to fall out? <img src="i/expressions/face-icon-small-smile.gif" border=0>

why red for OP? I was wondering the same thing. It sounds like alot of people did not know the answer to this question. As long as it is a legitimate question why neg OP?

umcsom said: [Q]why red for OP? I was wondering the same thing. It sounds like alot of people did not know the answer to this question. As long as it is a legitimate question why neg OP?


Not sure why red. I too didn't know this. I discovered it a few weeks ago on a 10% drop. I don't check every day but the day that I checked on, a particularlly good day on the market, showed a 10% drop in my largest fund. I saw it return to normal value with more shares the next day. I was always under the impression that capital gains/dividends distributions were simple cash monies used to buy more of the stock at the same price. Did not realize that the share costs decline and more shares created. Makes sense though...also explains why you don't want to buy into a mutual fund all at once during the month of December (or anytime right before these distributions are released) as you'll pay tax on something that you didn't own very long (do I have that right?).

you're right, engineer...unless it's in a tax deferred vehicle, such as an IRA....

raringvt said: [Q]OP--why would you bother watching performance daily on all the funds? What a waste of your life.

They're listed on my google personal page. They just show up whenever I open the browser.



I guess this makes most technical analysis charts worthless for mutual funds.

Use yahoo finance and lookup your fund. It will give you the date of the last dividend and capital gains distributions, most likely the same date as your large % drop. Had 1 of my funds drop 12% and it freaked me out but then I verified on yahoo finance about the dividends.

My Janus fund JSVAX after going up just over 20% for the year through 11/30 dropped 20% on Friday!

Net Asset Value: 16.73
Trade Time: Dec 15
Change: -2.01 (10.73%)
Prev Close: 18.74
YTD Return*: 20.87% (as of Nov 30)
Net Assets*: 4.00B
Yield*: 0.20%
* As of 30-Nov-06


The graph looks like someone jumped off Niagra Falls. <img src="i/expressions/face-icon-small-smile.gif" border=0>

Since this thread is already in production, I'll post a question here. Dp distributions (cash dividends, short term capital gains, long term capital gains) from mutual funds behave this way..i.e. lowering the cash price down for the shares and then distributing the monies or do some simply give the money (dividends for example) without touching the cash price of the shares of the fund?

Also, if the share prices are indeed lowered from the distribution, I assume this would effect the basis of your original purchases of the shares (not reinvested shares)...i.e. your original shares, since they have lower cash price, would now have lower capital gains (if any depending on your original purchase price or even a loss?) if you sold them openingly?

Edit: for taxable accounts only.

if the OP is looking at the NAV and not the account value, then it's possible the fund company made some investments recently that aren't on the quarterly report yet. did some company recently drop like 20% in a day?

it also depends on the fund's size. much easier for a $300 million fund to drop more than for a $20 billion fund

TheXung said: [Q]hair said: [Q]I'd bet there was a distribution of capital gains (most likely given this is the normal time of year for that to occur). Either they pay out in cash, or more likely in the case of a retirement account you have them reinvest. In reinvestment your number of shares will increase, while the value of each shares decreases by the amount of the dividend. Even though the value of the shares drops you didn't lose 6-7%. You should be able to check your number of shares owned or account activity to confirm this.

But I checked the total balance of the account today and there's a huge chunk subtracted from the balance going from yesterday to today. There have been no recorded transactions for today either, so the number of my shares hasn't changed. Does the redistribution happen across several days? It's sort of difficult to trace the same event happening last year because our 401k provider only keeps a viewable history of exactly one year. I'm hoping this is just a weird artifact of me watching the balance daily.

I noticed this on my 401K earlier this week. It took a few days for there system to actually show the transactions in the transaction logs. It was a dividend though. I'd just wait it out and watch your statement.

xerty said: [Q]My friend was freaking out when his (broad equity)fund dropped 20% in one day. It was just a distribution, which showed up in his account after a day or two. Quite a scare for him though.

Sounds like your friend might want to increase his fixed income allocation if he gets so freaked out.

Engineer said: [Q]Since this thread is already in production, I'll post a question here. Dp distributions (cash dividends, short term capital gains, long term capital gains) from mutual funds behave this way..i.e. lowering the cash price down for the shares and then distributing the monies or do some simply give the money (dividends for example) without touching the cash price of the shares of the fund?

Also, if the share prices are indeed lowered from the distribution, I assume this would effect the basis of your original purchases of the shares (not reinvested shares)...i.e. your original shares, since they have lower cash price, would now have lower capital gains (if any depending on your original purchase price or even a loss?) if you sold them openingly?

Edit: for taxable accounts only.

When a fund pays capgains/dividends, the share price decreases. The idea is that this money was being held by the fund before, but now its been given back to you, so the fund has less money. On the other hand, you now get the money and can reinvest it to have more shares.

I don't think that the distribution affects your basis. They'd have lower capital gains because the share price is lower, not because the basis is smaller. I generally separate my purchases on my tax return for all reinvestments (yes, its annoying, but I believe that's what you're supposed to do, although maybe doing average purchase price also works).

dblevitan said: [Q]Engineer said: [Q]Since this thread is already in production, I'll post a question here. Dp distributions (cash dividends, short term capital gains, long term capital gains) from mutual funds behave this way..i.e. lowering the cash price down for the shares and then distributing the monies or do some simply give the money (dividends for example) without touching the cash price of the shares of the fund?

Also, if the share prices are indeed lowered from the distribution, I assume this would effect the basis of your original purchases of the shares (not reinvested shares)...i.e. your original shares, since they have lower cash price, would now have lower capital gains (if any depending on your original purchase price or even a loss?) if you sold them openingly?

Edit: for taxable accounts only.

When a fund pays capgains/dividends, the share price decreases. The idea is that this money was being held by the fund before, but now its been given back to you, so the fund has less money. On the other hand, you now get the money and can reinvest it to have more shares.

I don't think that the distribution affects your basis. They'd have lower capital gains because the share price is lower, not because the basis is smaller. I generally separate my purchases on my tax return for all reinvestments (yes, its annoying, but I believe that's what you're supposed to do, although maybe doing average purchase price also works).

Thanks. I just read a few articles and it was NAV (Net Asset Value) that I was looking for, not BASIS. Obviously, if I bought a fund today and it took a 20% cash price drop tomorrow because it gave 20% capital gain distribution, I could sell it and realize the loss from the current sale. In actuality, the loss from the sale would offset the capital gains distribution. The BASIS for the original funds purchase didn't change, the NAV did. Of course, because I usually reinvest the distributions, I would have more share of the fund to sell and the "average" BASIS would be lower (assuming I reinvested).

I'm glad I'm not an accountant! <img src="i/expressions/face-icon-small-wink.gif" border=0>

Understanding mutual funds distributions

Capital gains or capital punishment?

bluegenie said: [Q]xerty said: [Q]My friend was freaking out when his (broad equity)fund dropped 20% in one day. It was just a distribution, which showed up in his account after a day or two. Quite a scare for him though.Sounds like your friend might want to increase his fixed income allocation if he gets so freaked out.I appreciate your advise, but I would argue he was concerned with good reason. It's one thing if the market was down 20% and so his fund was too - he would have been unhappy about the loss, but not worried about his fund in particular. If your broad market equity fund drops 20% when the market is flat and you check it's major holdings to be flat, you have good reason to be worried. How do you know the fund management company just didn't get indicted for fraud and running off with everyone's money or something like that?

raringvt said: [Q]OP--why would you bother watching performance daily on all the funds? What a waste of your life.

--------------------------------

Always prudent to monitor your investments.

thanx...i also had a similar question....i get the point now!

davidaexp1 said: [Q]raringvt said: [Q]OP--why would you bother watching performance daily on all the funds? What a waste of your life.

--------------------------------

Always prudent to monitor your investments.

I think the key word is daily. If you want to be involved in your investments daily you probably would be more satisfied with individual stocks. Tracking 30-50 individual stocks which make up a mutual of which you cannot control either the components or proportion would be highly unsatisfying.


asdf9876 said: [Q]davidaexp1 said: [Q]raringvt said: [Q]OP--why would you bother watching performance daily on all the funds? What a waste of your life.

--------------------------------

Always prudent to monitor your investments.

I think the key word is daily. If you want to be involved in your investments daily you probably would be more satisfied with individual stocks. Tracking 30-50 individual stocks which make up a mutual of which you cannot control either the components or proportion would be highly unsatisfying.

Since this has been asked my many, I'll give my reason for tracking my funds daily. Since I subscribe to the the merits of technical analysis for investment guidance, I figured, why not try to use technical analysis methods to shift money around amongst my more volatile moving funds, especially in the 401k where the trades are free. However TA methods require quick response to market conditions, ergo, the need to track daily.


Besides the only other investments I have total only $14k split between 2 stocks; which doesn't amount to sufficient excitement.

Relax! These are distributions. You haven't lost a dime!!

now if a distribution can reduce the NAV (and show a drop after distribution), would the historical stock charts be adjusted for this distribution? i.e., when a stock pays dividends or a stock splits (i know its not the same thing), the historical prices are adjusted.

I check my balance everyday since I work at the brokerage house. I wasn't afraid at all when the market was dropping in 2002. In fact, I was putting my money in knowing that I won't need it for another 4-5 years. Now I ended up with huge unrealized gains. I am looking to use this money to buy a house next year.

By the way, back to the subject. On Dec 14, the AIM mid cap core (GTAGX) made a distribution of ~$4.60 dividend and the client thought he lost $6000 in one day. Since he owns many mutual funds, I had to spend 30 minutes to figure out which funds made that distributions since he wanted to know. Now...that is a waste of time!

Moral of the story, please don't call your broker and waste their time. It is just a normal year end distributions. It might take a week to show in your account.

Thanks for listening to me vent!

VWIGX (Vanguard International Growth)
Tue Dec 19 2006
Open 26.09
Close 23.58
Change -2.51 (-9.62%)
Div 0.53
ST Gain 0.468
LT Gain 1.568

no need for alarm.







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