AboutWarren Boroson Expertise Author of "Keys to Investing in Mutual Funds" (Barrons), "Ultimate Mutual Fund Guide" (Probus), "How to Pick Stocks Like Warren Buffett" (JKLasser), and "The Reverse Mortgage Advantage" (McGraw-Hill). Former financial columnist for Gannett News Service.
Experience Author of 20 books; winner of 1996 Personal Finance award from Investment Company Institute and Washington University. Formerly on staffs of Money and Sylvia Porter's Magazine. Had a radio program (on WEVD) about mutual funds and a newsletter, FundDigest.
Expert: Warren Boroson Date: 12/19/2006 Subject: Mutual fund performance
Question Hi
I own shares of a natural resource mutual fund that went down dramatically today (12% in one day). Curious as to why it dropped so much, I checked how the top 25 stocks it holds performed (which comprise over 60% of its assets). I was surprised that none had dropped more than 6%. All of the top 25 holdings dropped between 1% and 6%. Isn’t the value of a mutual fund just the aggregate of the value of its components? How could the fund as a whole seemingly drop more than the shares it holds? (I know I am assuming the other 40% of its assets did not drop more dramatically.)
Answer Dear Chris--
My Fidelity Natural Resources Fund took a big hit the other day, too, but not more than most oil stocks suffered. Oil stocks have gotten incredibly volatile. But I think oil is still a good investment.
If your fund went down so much that it's puzzling, there may have been a distribution that day -- money from realized capital gains and dividends may have been given to shareholders. You can phone the fund aand ask if there was a distribution. This is the month for it.
Another possibility: Funds assess regular charges for expenses. Often they do this every day. But sometimes they do it all at once--and this may account for the big drop that day with your fund.
