Window Dressing is a Term That I Just Learned

I read a few news that talked about window dressing at quarter end lately. I didn’t know what window dressing was about so I did some research on it and found the following definition on answer.com.

Window dressing is a strategy used by mutual fund and portfolio managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders. Performance reports and a list of the holdings in a mutual fund are usually sent to clients every quarter. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund’s holdings.

Another variation of window dressing is investing in stocks that don’t meet the style of the mutual fund. For example, a precious metals fund might invest in stocks that are in a hot sector at the time, disguising the fund’s holdings, so clients really have no idea what they are paying for.

Window dressing may make a fund appear more attractive, but you can’t hide poor performance for long.

http://www.answers.com/topic/window-dressing

So is that Bank of America’s up and Patriot Coal’s down today have something to do with window dressing? Probably. If that is case then BAC may come down a bit and PCX should go up a bit after tomorrow. We will see.