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Technology Stocks : America On-Line (AOL)
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To: Joseph Shah who wrote (20977)6/9/1999 12:03:00 PM
From: Dr. Zax  Read Replies (2) of 41369
 
Hi,

Fund managers do "time" their holdings. Index fund managers are not supposed to time their holdings. The point of an index fund is to mimic the indexes growth (or decline) exactly. The investor who invests in an index fund is doing so as a bet on the index, not the skill of the fund manager.
It may very well be that fund managers will ramp up their holdings of AOL (and some other big names) for the end of the quarter. This will help out the major indexes a little. This is known as "window dressing." However, index fund managers have not sold AOL as it has not left any indexes, so they won't be buying any either.

I am not so sure about this part so somebody correct me if I am wrong (please, I would like to learn). I believe that "turnover" refers to a one year period. It is calculated by the percentage of stocks that have not been held since the beginning of that period. Thus if a manager sells AOL on Jan 5, and buys it back Dec 25, at the end of the year this manager has 100% turnover in AOL. A fund like the dogs of the Dow sells all of its stocks at the end of the year to pick up the new 20 dogs of the Dow for the next year -- even if 18 of these stocks are the same, there is still 100% turnover (and major short term capital gain for the investors)

Dr. Zax
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