Like a lot of people, I invested in mutual funds through one form or another in order to supplement my pension. The trouble is I don't have a degree in finance, and nobody really ever explains the intracasies of these things when you're buying them. Admittedly, I am a financial moron. OK, now my question is this. Everyone tells you not to do this, but the inate gambler in me is still sore about losing so much cash in 2001. Therefore, last August with only 8 months before my retirement, I decided to pool all my money into a volitail international/emerging market fund (Morgan Stanley Emerging Markets - MGEMX) and hoped to regain some of my loss. The fund was doing excellent till Thursday when it took a huge drop. Somebody told me the reason this mutual fund dived so low was that it was "ex-dividending." Not knowing the first thing abiout what that means I pulled all my money out and put it in a safe account till I figure what to do next. Can somebody explain to me what happened?
2006-12-23 09:27:02 · 7 answers · asked by Jumpin' Jack Flash 1 in Business & Finance ➔ Investing
Don't feel bad. The only thing you have lost is the movement in the fund until you get back in, that's assuming the fund moves higher during your "safe haven" time. If it moves lower prior to a re-entry you might feel like a market guru. I panicked like you, but I did contact Morgan Stanley at their 800 number and got the info to calm me down. I now have more shares and hope to benefit in the 1st quarter by the shares moving back to the pre-dividend value, not that there is any guarantee of that happening. Emerging market funds seem to be on a good footing going forward in '07, but the valuations are high. Money appears to be poised to further enter this arena. Time will tell. Side note: I am looking at a chart of Ishares (ticker EEM) to track throughout the day the effect of world affairs on emerging market funds. My only problem with MGEMX, and others liket it, is that you can't get a picture of the funds closing prior to the end of the day. A view of EEM tracks nearly identical on a chart with MGEMX and might help in making a decision to bail prior to the daily close. Also - don't forget that should you re-enter MGEMX you will be penalized 2% should again bail before the 1st 30 day period is up.
2006-12-24 09:25:14 · answer #1 · answered by Ron 1 · 0⤊ 0⤋
On Dec. 21, they paid a dividend of over $5 per share. That's a lot for a fund with a NAV in the low $30's (before the dividend.) That payment lowered the value of each share, but it bought you more shares. Simply distributing a dividend does not materially change the value of your investment. If you check your account you will see that you had more shares than you did the day before the dividend was paid. That is, before the ex-dividend date.
This fund has performed pretty well over the past year, better than most in its comparison peer group, and far better than domestic large-cap funds. Why did you cash out the fund without knowing what happened? Why didn't you call your broker and get information and advice first, then decide what you wanted to do?
2006-12-23 11:10:59 · answer #2 · answered by Carlos R 5 · 1⤊ 0⤋
I agree with Carlos and Pete.
Most of the growth in the world economy will be international from your point of view. US is already the 'large cap' country... pretty hard for US to grow at 8 to 10% a year. Faster growth will occur in the rest of the world as US losses its dominance and classification as the ONLY super power. The rest of the world is industrializing and large middle classes are emerging. Perhaps US will turn out to be a Europe... still doing very well but no longer the star.
Since you are in or near retirement I suggest you pool most of your money into something that will get you income... high dividend stocks... mainly US stable and large companies that do pay the dividends. Pick great companies or a realy good mutual fund with a history of being very conservative and income oriented. These may not grow quickly but you should do alright and you will also earn some money to live off of during retirement. I also suggest putting some money into international growth funds. Expect this amount to do very well, but be prepared to lose it as well. Many other countries don't have the legal reporting laws in place to protect shareholder's. Most of your money should be producing income for you to retire on anyways. It's time to relax and enjoy retirement... not sweat each time a stock drops a few bucks.
Remember, your stocks are peices of actual company's. The stock might go down but as long as the company is still doing good you shouldn't worry (unless you wanted to sell soon...) as the price will probably bounce back eventually... as long as it was a good company, of course.
2006-12-23 12:04:58 · answer #3 · answered by ulchka 3 · 0⤊ 1⤋
Well Ur Fund shoulld do a Hold for a while...3 months
Generally a sell for the year
should go back over the next 4 wekks
I suggest U get out at 32 and Buy again at 18 to 20
2006-12-23 21:46:23 · answer #4 · answered by Khalid 2 · 0⤊ 0⤋
You have asked one question, and implied some more. First, "ex-dividending" simply means that the fund made a distribution of dividends to investors to shift the liability for taxes on gains. Funds typically do this just before the end of the year so it doesn't have to declare the gain themselves. It should show up in your account or be mailed to you depending on how you set up your account. It is not that the fund took a hit, but that the net asset value has been reduced due to the distribution. Second, we all lost $$ in '01, but it is not the best thing to do to plop your life savings into volitile (read: risky) investments whether to make money or to recover a loss. A better idea - in your circumstances - is to invest in securities that pay higher dividends rather than only in growth stocks.
2006-12-23 09:46:16 · answer #5 · answered by Pete 4 · 3⤊ 1⤋
Ex dividend means the company did a payout of its gains, probably for the whole year, to the shareholders. It's common for mutual funds to do that at this time of year. If you are reinvesting your dividends from the mutual fund, after the payout you'd have more shares, but each one would be worth less - your total would remain the same as it had been.
This happens with stocks too - many stocks pay dividends quarterly. In most cases the owner can either reinvest them (they stay in, and the money is put into additional shares), or have a check sent to them for the amount of the dividend.
2006-12-23 10:12:49 · answer #6 · answered by Judy 7 · 0⤊ 1⤋
If I remember correctly, "Ex-Dividend" means the share in a company has gone past the date for current investors to become eligible for the next Dividend pay-out..... from what I've seen in the past couple of years in my career investing for real, it isn't uncommon for a stock to take a temporary plunge, as investors take less interest in it, and either sell-up or quit buying it for a while.
2006-12-23 09:46:59 · answer #7 · answered by Anonymous · 0⤊ 2⤋
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2006-12-24 22:58:24 · answer #8 · answered by Anonymous · 0⤊ 0⤋
Looking at the minimual amount it takes to open this account, you should be asking Morgan Stanley.
Thats whats crappy about mutal funds, you only know what they tell you yearly.
http://www.morganstanley.com/im/publications/ffs/20060630/ffs_1053a_en.pdf
2006-12-23 09:47:29 · answer #9 · answered by Grandpa Shark 7 · 0⤊ 1⤋