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Fund Distribution

One of the toughest tasks in dealing with mutual funds is tracking their day-to-day performance. Many funds publish their daily NAVs, which can be tracked by consulting financial papers or Web sites, but tracking a fund’s NAV is unlike tracking the share value of a stock. With stocks it is easy to see how they are doing even on a real-time basis. Just look up their quotes and you have it. A fund’s NAV doesn’t work quite the same. One day you may see your fund’s NAV at $20 and the next day it may be $15. What happened? A number of possible scenarios could have taken place.

Splits — Just like companies who split their stocks from time to time, funds may also engage in the same exercise. After a split you would end up with more shares but each share would now be worth less. It’s a zero-sum game. Nothing to panic about. In our example, the fund might have gone through a 4 for 3 share split.

Mergers — Again just like companies that merge and the stockholders may end up with a different number of shares with a different price than the pre-merger date, funds may merge as well. This is also usually a zero-sum game. Your account would still be worth the same (barring price changes that may have happened to the fund’s portfolio in the meantime), but you may end up with a different number of shares and a different NAV. Again, nothing to be too concerned about unless you just don’t find the merger appealing.

Down Day At The Market — Well, this is something to worry about. It is certainly possible that the fund simply got hammered because its portfolio lost money for that day. If, for example, your fund is a large cap value fund and DJIA had a big point drop for that day, you would expect that your fund wouldn’t fare well either. Yes, something to worry …