Please advise! can a mutual fund be down over 25% in one day?

[weester]

Hi everyone,

Happly holidays. I have a mutual fund from troweprice called troweprice global technology "PRGTX" . Today, it went down over 25%. This is a manage mutual fund. Just wondering is it possible that it went down over 25% in one SINGLE day.

thank you very much,

 

[Trooper]

An excerpt from a conversation on Yahoo's Finance page:
"You'll see the correct value tomorrow after market open. The fund did NOT tank, it gave a distribution & you need to give them time to finish the calculations and post the information to your account. If you bought it recently, you need to understand that it does move up and down faster than the market (i.e., it has a large Beta) and NOT in sync with S&P 500."

 

[SevenUp]

Yes, the price can drop that much. See Brace yourself for a large tax bill from mutual-fund payouts - MarketWatch for the likely reason.

 

[Dabbler]

Not to fret. PRGTX had both short term & long term gains posted today. Distributions of $1.42 & $5.04 per share, respectively.
So you'll be getting it all back, tomorrow, either as cash, or reinvested in additional shares, per your settings.


I, too, own PRGTX . . . but in a tax advantaged Roth IRA. If this is not the case for you, there may be considerable tax consequences — depending on your share balance. (Which may have increased for you today, if your distributions were set to automatically reinvest.)


Bottom line: the decrease in PRGTX today, taking into account the distribution, was actually –3.81%
Still a significant drop, comparable to, and in the middle of other Technology funds, such as PRSCX (–2.25%)
and FSELX (–4.67%). A big driver of those descents was Qualcomm's fall by –5.52%


For further comparison, QQQ was down –2.57% today, while the tech index XLK fell –3.23%.
So while PRGTX is nominally "global" in scope, its overseas holdings are not significant enough to have cushioned today’s drop.
But I do like PRGTX as an actively managed tech fund (along with the aforementioned PRSCX & FSELX — all relatively expensive) and, should the selloff continue through tomorrow, I'm actually planning to purchase additional shares.
But, again, sheltered from taxes (within my Roth IRA).

 

[weester]

thank you very much for your response. I almost have a heart attack. I open my Roth IRA acct today and it shows my acct went down over 25%.

 

[OverThinkMuch]

thank you very much for your response. I almost have a heart attack. I open my Roth IRA acct today and it shows my acct went down over 25%.

The fund's holdings are extremely aggressive, and you will probably have some more shocking moments next year. As interest rates go up, very high growth funds get a discount, based on so much of their growth being in the future.

 

[weester]

The fund's holdings are extremely aggressive, and you will probably have some more shocking moments next year. As interest rates go up, very high growth funds get a discount, based on so much of their growth being in the future.

If that is the case, would you mind suggesting what I should do? should I move all to index fund like VTI? thank you.

 

[SecondCor521]

If that is the case, would you mind suggesting what I should do? should I move all to index fund like VTI? thank you.

It's a common recommendation to move towards index funds and ETFs, because they typically have much smaller distributions percentage-wise. This tends to make tax planning easier because you can target your AGI better. This is something that starts to happen when you retire and realize that targeting AGI can be a profitable hobby.

The consideration, sometimes, is that you may have accumulated some or a lot of capital gains, so selling your existing holding might increase your tax liability. This is especially a problem for funds that someone has held for a long time and/or has performed well.

To mitigate this somewhat, one can sell it off over several years to spread out the capital gains. You can also do capital gain/loss matching, whereby in the same tax year you sell lots that you might have purchased which have an unrealized capital loss as well as lots that you might have an unrealized capital gain, thus canceling each other out.

Switching over time from a targeted fund to an ETF like VTI will also affect your AA, which you may view either as a good thing or not.

But really the above are just general principles, and I don't think you should take tax or allocation advice from anyone who doesn't know your whole tax/investing/spending/goals picture - which is pretty much everyone on this forum. It is much better, I think, for people to learn the ins and outs and whys behind the recommendations so that you can apply those lessons to your own situation and have your own confidence for why you're doing something and to ensure that whatever move you make is right for you.

 

[weester]

It's a common recommendation to move towards index funds and ETFs, because they typically have much smaller distributions percentage-wise. This tends to make tax planning easier because you can target your AGI better. This is something that starts to happen when you retire and realize that targeting AGI can be a profitable hobby.

The consideration, sometimes, is that you may have accumulated some or a lot of capital gains, so selling your existing holding might increase your tax liability. This is especially a problem for funds that someone has held for a long time and/or has performed well.

To mitigate this somewhat, one can sell it off over several years to spread out the capital gains. You can also do capital gain/loss matching, whereby in the same tax year you sell lots that you might have purchased which have an unrealized capital loss as well as lots that you might have an unrealized capital gain, thus canceling each other out.

Switching over time from a targeted fund to an ETF like VTI will also affect your AA, which you may view either as a good thing or not.

But really the above are just general principles, and I don't think you should take tax or allocation advice from anyone who doesn't know your whole tax/investing/spending/goals picture - which is pretty much everyone on this forum. It is much better, I think, for people to learn the ins and outs and whys behind the recommendations so that you can apply those lessons to your own situation and have your own confidence for why you're doing something and to ensure that whatever move you make is right for you.

Thank you so much for taking time to explain it to me. I am 50yrs old and this is my ROTH IRA. it has about 200K in Trowprice (PRGTX) acct for over 15 years. . I max out my roth each year. I also am just trying to avoid high expense ratio and try to grow my retirement in next 10 years.

 

[SecondCor521]

Well, if it's in an IRA you wouldn't have the tax consequences I mentioned. You'd still have to decide what you want your AA to look like.

 

[Amethyst]

Yes, it's a shock to see the big drop after distro's, but if you have re-invested the distro's (instead of taking cash), you will see that you have more shares now.

So, as soon as your PRGTX share price goes back up a bit, you'll see a bigger balance than it was before the drop.

If you took the distro's in cash, you now have cash to pay the taxes on it

 

[weester]

Well, if it's in an IRA you wouldn't have the tax consequences I mentioned. You'd still have to decide what you want your AA to look like.

I would like to have 80/20 AA. however, i was wondering if I could continue to invest in high expense ratio like PRGTX or look for low cost index fund like VTI or SCHD etf instead of mutal fund.

 

[weester]

Yes, it's a shock to see the big drop after distro's, but if you have re-invested the distro's (instead of taking cash), you will see that you have more shares now.

So, as soon as your PRGTX share price goes back up a bit, you'll see a bigger balance than it was before the drop.

If you took the distro's in cash, you now have cash to pay the taxes on it

You are right. I do see that I have more shares but the price of PRGTX dropped and my porfolito YTD return also drops from over 20% down to 10%. I am still grateful though.

 

[LastOfTheBoomers]

That explains it - NOSGX dropped from 24.21 to 20.50 - but with a LTCG distribution.

 

[UnrealizedPotential]

OP,
what you can do in the future is look to see what the total distribution is for the fund. I do not know what it is in your case, too lazy to look. But whatever the amount of the distribution, you multiply that times the number of shares you currently own. That will give the distribution in the dollar amount. You divide that number by the closing price of the fund and that will give you the approximate number of new shares you have.

I have T Rowe Price funds and I do that every year that gives me a very good idea of what my new number of shares are before they are credited to my account.