Window Dressing

AAA

DEFINITION of 'Window Dressing'

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. 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.

INVESTOPEDIA EXPLAINS 'Window Dressing'

Performance reports and a list of the holdings in a mutual fund are usually sent to clients every quarter. 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.

RELATED TERMS
  1. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
  2. Survivorship Bias

    The tendency for mutual funds with poor performance to be dropped ...
  3. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  4. Fund Manager

    The person(s) resposible for implementing a fund's investing ...
  5. Average Annual Return - AAR

    A percentage figure used when reporting the historical return, ...
  6. Dividend

    A distribution of a portion of a company's earnings, decided ...
RELATED FAQS
  1. How do no-load funds typically perform relative to load funds?

    No-load mutual funds are pooled investments that do not carry an upfront sales charge when purchased or a deferred sales ... Read Full Answer >>
  2. What are the most popular mutual funds that invest primarily in the insurance sector?

    Under the purview of the financial services industry, the insurance sector is an attractive investment option for mutual ... Read Full Answer >>
  3. How should I use portfolio turnover to evaluate a mutual fund?

    The portfolio turnover percentage can be used to determine the extent to which a mutual fund turns over its stocks and assets ... Read Full Answer >>
  4. What are the risks involved in a banker's acceptance?

    College savings accounts are excellent ways to encourage saving for future college costs. Contact your investment professional ... Read Full Answer >>
  5. For what reasons are electronics stocks commonly purchased by a value investor?

    Administered by the Financial Industry Regulatory Authority (FINRA), the Series 6 exam – Investment Company and Variable ... Read Full Answer >>
  6. What is the difference between a modified duration and a Macaulay duration?

    Individuals have a handful of options for places to keep the funds they wish to keep guarded from the volatility and risk ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    January: Time To Read Your Mutual Fund's Annual Report

    Don't let this valuable piece of mail end up in your trash can. Here are five things you need to know.
  2. Mutual Funds & ETFs

    Should You Follow Your Fund Manager?

    Learn how to tell if a fund in flux is still a suitable investment.
  3. Investing Basics

    Understanding Open-End Funds

    An open-end fund is a type of mutual fund that does not limit the amount of shares it issues, but issues as many shares as investors are willing to buy.
  4. Mutual Funds & ETFs

    Why You May Want To Be (And Stay) In Bonds

    Bonds are complicated, and it’s easy to feel intimidated or confused. Fortunately, you don’t need to be a numbers geek to be an informed investor.
  5. Professionals

    5 Signs That You Have a Lousy 401(k) Plan

    Knowing whether a 401(k) plan is good or not so good is important. This will help participants decide how much to invest and when to demand improvements.
  6. Professionals

    A Look at How the Ultra-Wealthy Invest

    Ultra-wealthy investors are cautious this year as they approach the markets. Many target mutual funds and stocks, but most also diversify their portfolios.
  7. Investing Basics

    What Does Overweight Mean?

    In the investing world, "overweight" refers to an expected stock performance, or a portfolio that is out of balance.
  8. Investing

    Portfolio Tips For Pursuing The Outcome You Want

    If you have a portfolio, you probably know why you’re invested. Whether it’s a 401(k) or a brokerage account, your portfolio serves some purpose.
  9. Fundamental Analysis

    Explaining Annual Returns

    Annual return is the standard percentage rate for most investments and credit facilities.
  10. Professionals

    Target Date Funds: More Popular, Cheaper Than Ever

    How target date funds can help investors weather volatility when it comes to saving for retirement.

You May Also Like

Hot Definitions
  1. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  4. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  5. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  6. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
Trading Center