DALTON MUTUAL FUND MODEL (v2.0) TO GET STARTED QUICKLY ________________________________________________________________ INSTRUCTIONS: If this is the only thing you read, READ THIS: Before starting the program (FUND.EXE), run the setup program (SETUP.EXE) by typing in 'SETUP' and pressing . With this program, you can use UPPER or lower CAPS. Make sure, however, to press after you have entered any data in the program. This is shareware software. If you find this program of value, send $5 to: Dalton Software Associates 909 N. 1550 E. Layton, Utah 84040 ________________________________________________________________ OPERATING THE PROGRAM SETUP: Just type in 'SETUP' and let the program run. The computer will prompt you for the four previous day's or week's values of the following indicators: Your Stock Market mutual fund (1 or 2 of them), the Dow Jones Industrial Average, and the S&P 500. In addition, the computer will want to know the latest value of the Prime Interest Rate. This in turn will create the data files that the program needs to write and retrieve data. The previous four day's/week's values are needed so that this program can start out with a "smoothed" average of the indicators, thereby avoiding any conflicting signals in the beginning of the program. NOTICE: If you do not have access to the previous four day's (or week's) info., just put in the values that you do have. It must be emphasized that without a four day average, the model will tend to give "whipsaw signals" in the first few days of use. IF YOU DO HAVE moving averages already, just type in that number for each of the four prompts. FUND: Type 'FUND'. The running of the program is an easy endeavor. At the bottom of each screen there will be instructions as to whether to proceed, go to a previous screen, quit, or print. DAILY OR WEEKLY DATA? This program offers two different ways to go about switching between a Stock Market fund and a Money Market Fund: 1) On a daily basis or 2) On a weekly basis. One must make the decision of which one to use - you cannot use both at the SAME TIME or else you will get conflicting signals. One CANNOT input data one day for a daily value and the next day for a certain week. Therefore you must make a decision and stick with it. For those of you who keep up on the market on a daily basis, Choice #1 is for you. For those of you who are not tuned in to the markets on a daily schedule and would just rather update your portfolio on the weekend, use choice #2. NOTICE: It must be pointed out that there will be more precise signals if one uses this program on a daily basis than on a weekly schedule. This is so because on a daily basis you are simply giving the computer more data to use, which results in more precise buy/sell signals. INTERPRETING THE BULL/BEAR SCREEN We SUGGEST the following usage of the point structure found in the Bull/Bear Screen: EXTREMELY BULLISH: Buy (go into a stock fund). MILDLY BULLISH: Buy/Hold (stock fund). NEUTRAL: Sell (go into your money market fund). MILDLY BEARISH: Sell (go into your money market fund). EXTREMELY BEARISH: Sell (go into your money market fund). In addition, one might want to use percentages of stock and money market funds. For example, given a neutral sign, go into 50% stock, 50% money market fund. Or given a mildly bullish sign, go 70% stock, 30% money market fund. FINANCIAL INFORMATION: MOST daily newspapers will have a Financial/Business section that lists all of the indicators used in this program. If you do not have access to one, watch the Nightly Business Report (NBR) or a national or cable program that has access to financial information. Newspapers such as Investors Daily, which has an excellent price section on mutual funds, or the Wall Street Journal provide excellent data. This whole program is designed around the concept of a minimum time/money effort in getting the information EASILY and using it QUICKLY. PURPOSE: The purpose of this software program is to provide a way for individual investor's to have a simple, consistent, investment program that allows an easy, proven method to switch their money between a Stock market mutual fund and a Money Market mutual fund. This program is designed with a long term, conservative philosophy in mind - therefore one is not switching their assets every two weeks. Rarely will you find yourself switching your money more than a few times a year. This is not a program for short term professional traders. METHOD: This program uses both a technical and fundamental approach in its design. It has been an OVERRIDING concern to use various market indicators that are at once very available to the public and have proven themselves over time. It has taken months to test over and over various technical and fundamental indicators that are suitable for mutual fund switching and at the same time are available in everyone's newspaper. This program uses the following market indicators: A) Exponential moving averages of: 1) Your Stock mutual fund 2) The Dow Jones Industrial Average 3) The Standard and Poor's 500 Composite Stock Index B) The Prime Interest Rate These indicators are given various points according their performance (i.e. Is the S&P 500 Index value above or below it's 200 day moving average? If so, so many points are awarded and so on for the other indicators). These are then added up on a rating scale and a structure is used to determine whether or not to switch between a Stock mutual fund or a Money Market mutual fund. It has taken many months to determine just precisely which rating scale to use and what structure to base it on. The one structure that is presented in this program has been tested over a period of months using current and historical data and has been found to give the best sell/buy/hold decisions out of the many we have tested - yes, you would have been out of your Stock Market mutual fund and into Cash (a Money Market mutual fund) during the October 19 crash. For our own testing we used Twentieth Century's Select/Growth Investor's and Cash Reserve accounts using both the daily and weekly options (for the weekly option we updated our portfolio every Friday). WHY THIS METHOD: Switching between a Stock Market mutual fund and a Money Market fund at the correct time can prove to be very profitable over the long term. Under this assumption, switching has proven to be to much better than a simple buy/hold strategy. We chose to use the above indicators for a number of reasons. In terms of technical analysis, moving averages have been found to be a very reliable indicator out of the gamut of indicators in the marketplace. Time and again, during MAJOR trends in stock market action, moving averages have given superb signals. Our decision to use exponential moving averages was based on the fact that exponential moving averages are weighed more toward current price action and therefore give more accurate signals based on current market conditions, rather than treating all prices/values alike as in a simple moving average. Likewise, the decision to use the Prime Rate instead of other indicators was that it was found to be a very accurate indicator of FUTURE stock market action. Over time, it has proven itself to be a very reliable monetary indicator. Moreover, it is widely available in daily newspapers, not just in Barron's or the Wall Street Journal. Using the Dow Jones Industrial Average and the Standard and Poor's 500 Stock Composite Index was an easy decision. The Dow, even though it is made up of only 30 Industrial stocks, is still the one indicator that is most closely followed and predicted upon when dealing with stocks. The addition of the comprehensive S&P 500 index is used to insure that market action is going in one direction before the model gives a buy/sell signal, thereby avoiding many "whipsaw signals." TYPE OF MUTUAL FUNDS?: In terms of picking mutual funds, we SUGGEST a no-load mutual fund family that will allow QUICK switching between different funds (especially a Stock Market fund and a Money Market fund!). It is very important that you find a mutual fund family that will allow switching from one fund to another within a minimum of a few days and will not charge you excessively for it. This is to protect the investor from any (hopefully none!) whipsaw signals one might encounter. A good place to start picking funds would be to look at FORBES annual Mutual Fund Survey. This is where all of the available funds are rated, indexed, etc. and one can gain a lot of valuable information looking over the annual issue. In addition, there are many surveys put out by many magazines - Money, Financial World, Consumer Reports, etc, that can help the individual out immensely. Check out your neighborhood bookstore for more information. MISCELLANEOUS: If for some reason you want to erase the previous day's week's data from the files, goto DOS and at the prompt type 'del *.dat' - and that will erase the old values. HISTORY OF THE DALTON MUTUAL FUND MODEL 1/88 - Began the first version (1.0). Consisted of simple buy/sell signals based on moving averages. 3/88 - Went to version 1.1. Added DOW, S&P 500, Prime Rate, etc. 6/88 - Version 1.2. Added a well tested scoring system of the DOW, S&P 500, the Prime, and a stock mutual fund. Subsequently released as shareware. 10/88 Version 2. Can handle 2 Stock mutual funds, ease of use and external features are improved (date, name of stock funds, outline of screens, etc.). Included a new bull/bear screen in place of straight buy/sell signals. This gives the individual investor more leverage to make up their own minds as to the percentage of assets to be allocated. Future, improved versions to come. !! DISCLAIMER !! Finally, it must be known that although this program has been designed so as to provide a safe, healthy return on your investment, Dalton Software Associates assumes NO RESPONSIBILITY for any losses or damages resulting from the use of this software. ----------------end-of-author's-documentation--------------- Software Library Information: This disk copy provided as a service of The Public (Software) Library We are not the authors of this program, nor are we associated with the author in any way other than as a distributor of the program in accordance with the author's terms of distribution. Please direct shareware payments and specific questions about this program to the author of the program, whose name appears elsewhere in this documentation. If you have trouble getting in touch with the author, we will do whatever we can to help you with your questions. All programs have been tested and do run. 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