Recently
several large mutual fund families have been
fined and sanctioned for illegal or unethical
after hours trading and market timing. Do not
confuse our market timing method with these
operations. Our timing method does NOT
fall under these illegal/unethical actions.
The violations by those fund groups
fall under two categories. The FIRST was allowing
certain fund shareholders to Buy or Sell the fund
shares AFTER the stock market was closed at the
earlier closing fund price. The other
shareholders, not being allowed to trade after
hours at a previously posted price, were being
unfairly treated by the fund. OUR METHOD DOES NOT
ATTEMPT TO OBTAIN ILLEGAL/UNETHICAL TRADES AFTER
THE CLOSE. Orders you enter with your fund after
the market close will be filled at the close of
the NEXT business day, not the same day.
SECOND, some funds allowed certain
shareholders to Buy or Sell the fund shares
during the trading day in frequency and volume
not allowed by the fund prospectus. Other fund
shareholders were not allowed to exceed the
number of exchanges permitted by the prospectus.
This clearly was unfair to the other
shareholders. OUR METHOD DOES NOT ATTEMPT TO
OBTAIN EXCESSIVE TRADES IN FUNDS WHERE THE
PROSPECTUS LIMITS THE FREQUENCY AND VOLUME OF
EXCHANGES.
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All funds
permit a number of monthly or yearly exchanges as
outlined in their prospectus. They will not allow
YOU to exceed this number. Rydex and Pro Funds do
NOT have such limitations and are designed
specifically to allow investors to
"time" the market. Capital you have in
other fund families or retirement accounts may
have some exchange limitations and you should
check with the fund for the terms of those
restrictions.
As you can see, some mutual
fund groups got themselves into trouble because
they allowed a few privileged insiders to trade
their shares in a manner that other shareholders
were not. Market timing, as we practice it, is
perfectly legal and ethical and has been used by
mutual fund investors for many years.
Any further questions you have about
the legality of using our timing method on your
mutual fund shares can easily be answered just by
phoning a representative at your mutual fund
family. They will be more than happy to assure
you that making periodic exchanges is perfectly
legal and tell you of any exchange restrictions
of your fund.
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