For the last few months, subscribers have been able to comment on articles appearing in CI (starting with the September/October 2008 issue). If you have a comment regarding an article, go to the Computerized Investing Web site (www.computerizedinvesting.com), select the issue date, and open the article on which you want to comment. At the top and bottom of each article there is a link to “Add a comment”; posted comments appear at the end of the article. As always, we welcome your constructive comments and suggestions.
Morningstar.com is a Web site always rated highly by Computerized Investing. However, I believe there is a definite systematic mistake with some of their data, or at least misleading data relating to closed-end funds that would cause problems for investors. Take a look at the “% leverage” field on the “Snapshot” tab of the Morningstar Web site. This field was always blank for every highly leveraged closed-end mutual fund that I looked up—for example, PHK and PHT. I had assumed that the absence of a value means “no leverage.” As it turned out, this was not the case. Unfortunately, this is an especially important number for closed-end funds, as they are prohibited from paying out a dividend if the percentage of leverage goes over 40% or so. You can’t use Morningstar.com to screen for closed-end mutual funds, at least in regard to leverage. I know from sad experience.
—Richard via Add a Comment
CI Editor’s Response: While we rely on financial data all the time to make investment decisions, it is always a good idea to try and get confirmation from a second source before acting on it. This also highlights an interesting dilemma for data providers. In my experience, non-existent or “null” values receive different treatment among data vendors. A blank value, in this case, shouldn’t automatically be seen as a zero. More than likely, the data provider does not have a value to populate the field. Likewise, don’t always assume that a zero is, in fact, a zero. Other times, a zero value means just that. As this letter shows us, the difference between a blank, null, or a zero can have a very real impact on your investment performance.
I believe that some years ago I was able to go to a Web site, enter a mutual fund ticker symbol and get the total return for any period I wished. I cannot remember the name of that Web site and was hoping you could help. Preferably, the site would be free. Thank you for your consideration.
—T.M. via E-mail
CI Editor’s Response: While I am not sure this is the site you used, I do know that with the free advanced charting applet at the MSN Money Web site (moneycentral.msn.com) you can enter the ticker symbol of a stock or mutual fund and get a total return chart, including distributions, for any custom period. When you go to the MSN Money Web site, type in the ticker symbol to pull up the related data and tools for that security. At that ticker’s “home page,” click on Historical under Charts. If you have never used the MSN Money Web site from your computer, or if it has been awhile since you visited the site, you will probably need to download the MSN Money Investment Toolbox. There should be a link to it on the upper right-hand side of the page. However, this applet will only run on Windows 2000 or later (it is not Mac compatible) and requires the Internet Explorer Web browser. Once you have the Toolbox installed, select Investment Growth from the Chart pull-down menu and Custom from the Period pull-down menu. You can then specify the dates over which you want the performance chart created.
If anyone is aware of other sites offering return charts for stocks or mutual funds, please let us know.
The November/December 2008 issue included a description of VectorVest [Product Update column]. While the product sounds interesting, how does one evaluate its effectiveness as a trading tool? For example, how accurate has it been in its buy/sell/hold recommendations or its safety/timing indicators? It seems to me that many software programs can provide data points and establish comparisons. Prognostic ability should separate out the heavy hitters.
—R.S. via E-mail
CI Editor’s Response: Many software packages, including VectorVest, report their investment performance. It is always healthy to view these results with a grain of salt. That is not to say that any company is lying about their results. It is, however, a good idea to understand the conditions under which the results were generated and whether you could have achieved those same results. Most performance data we see for a given investment strategy are based on backtesting—meaning they are created using historical data and not real-world trading results. When considering backtested performance data, try to find out whether items such as commissions, bid/ask spreads, and dividend reinvestments were factored into the results. In the end, it is only through your own experience that you can decide whether a computerized trading tool is truly effective. If you use VectorVest or any other software package to aid your trading, we would welcome your comments regarding your successes or failures. Feel free to send them to us at firstname.lastname@example.org.