Monday, May 08, 2006

Fidelity Magellan: What's the problem?

Fidelity Observer just received this message from a reader, regarding Fidelity Magellan (FMAGX):
I’ve been watching Fidelity Magellan. It went from 115 to 94 yesterday. Does anyone know what happened? Was it a distribution or something?
Yes, there was indeed a drop of 21.25, or 18.33%, late last week. And it was indeed a distribution. But that didn't stop some people from nearly having heart attacks after logging onto, judging by the thread on the Investment Banter message board:
Last night my account only showed the NAV drop with no updates to shares held and overall value.
Another poster has a message for the programmers of the website:
Last night it was showing only the negatives : lower price per unit, lower total money in Magellan, lower number of units !!! Just like a stock plunge.

I guess the cheap programmers in Bangalore now have another glitch ("enhancement", I think they call it) they can fix. But only if someone lets them know. We may be the only folks who noticed!
Not anymore! I know that some Fidelity employees read Fidelity Observer, perhaps they can pass along a message to the Fidelity website people that:

A) share holdings should be updated earlier or

B) unusual NAV changes in Fidelity Funds should automatically trigger a red text message in the "My Accounts" area, notifying people of the reason (distribution, etc.) and that it may take an additional day for individuals' share holdings to be updated.


Terry said...

I saw the same thing? I show a $30,000 loss on Friday. Are you saying that this is not a real loss?

ian said...

Hello Terry,

I can't give a precise answer as I am unfamiliar with the details of your account and recent trades, but likely scenarios would either be:

1) The dividend was reinvested in Magellan, in which case there should be a corresponding rise in the number of Magellan shares you own

2) The dividend is being sent to your cash reserves.

Check your account history to see exactly what happened with the money; or call Fidelity customer service to see what's happening.

ian said...

Fidelity has posted a message about the Magellan distribution on the front page of Wonder how many calls they got from panicked investors?

mehoffer said...

Out of curiosity, why would anyone invest in a fund as large as Magellan?

ian said...

mehoffer: I think there are several answers. Some people automatically invest through IRAs or 401ks. Others have had the fund for years and don't know how to let go. Still others equate "big" with "high performance."

And then there's my old favorite, Fidelity marketing. Even if the company hasn't marketed the fund for years, half-remembered performance stats or taglines or pictures of Peter Lynch may encourage people to invest in the fund.

I have to admit: Performance may have turned around, too, which usually results in a spurt of new money.