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Strategies & Market Trends : LastShadow's Position Trading -- Ignore unavailable to you. Want to Upgrade?

To: dwight martin who wrote (7997)	2/8/1999 8:08:00 AM
From: LastShadow	Read Replies (2) \| Respond to of 43080

Mutuals Someone emailed an important question, and I thought I would share it here as well: "I noticed a few day ago that you mentioned you were opening an account with Vanguard Brokerage. I think you stated that this was going to be a 401K roll-over account. I'm curious if you looked at any of the other firms (Scudder, Fidelity) and what made you pick Vanguard. So I'm wondering if you are still thinking of moving most everything into mutuals? I've got (funds) to invest an I was thinking about getting equal amounts of say Microsoft, AOL, DELL, Qwest, and maybe a few others. Any thoughts on Internet stocks for the long term?" I started one new Vanguard Non-Retirement Brokerage Services account, and changed a traditional IRA over to a Self-Directed IRA (not a rollover). The difference in the latter is that with an IRA, I can only switch between Vanguard funds. With the Self-Directed, one can switch to other funds and stocks. The borkerage account I will do both stocks and funds. the IRA I am tenatively planning to only trade funds. The reason for Vanguard over Fidelity or others is simple. Vanguard had the largest number of better-than-average performing funds than anyone else, and they do not use Fair market Value pricing. This is very important if one is doing fund switching to either money markets or bear funds. Fidelity uses Fair Market Value to price their NAV's on their funds. It works like this: The market goes through a huge correction and drops 15%. Since the major high-dollar stocks swing the most, the NAV of their particular fund may drop 15% as well. Knowing that it is a day or two long correction and that it will rebound for at least half the loss, Fidelity calculates their NAV based on what the fair market value is for the constituent stocks and uses that number for the NAV rather than what the actual stock prices would make it for the day. They do this to prevent folks from daytrading their stocks. During the October correction, some people employing a short-term trading strategy for funds actually discovered that they paid more for the fund when they bought it than when they sold it because of Fair Market Value pricing. They bought on the day of the tanking, and sold three days later - during those three days, the NAV of the fund went lower since it didn't represent actual market valuation. I called Vanguard to ask if they used Fair Market Valuations. I was transferred to 4 other people, until I finally got one gent who was authorized to contact their Valley Forge operations. Nope, they don't. So, Vanguard has lots of funds, a huge selection of other funds to trade (including Fidelity's, Rydex, Scudder and ProFunds), does not use Fair Market Value pricing, and has reasonable commisions - although as an online broker I wouldn't expect any better service that through anyone else. But its for postion holds, so not that critical. As for longer term thoughts on Internet stocks, I would offer this: They have a different valuation model, but its not that different. Choose stocks based on comparative fundamental criteria (P/E, etc.) and look for technical lows to enter. Then set protective stops. lastshadow