Right now you can be glad you read on.

You see, I don’t want to tell you a conspiracy theory about how your life is in imminent danger and you don’t even know it.

I want to tell you about an event that happens four times a year, and gives you a fantastic opportunity to make money trading shares or indices.

Before I start let me fill you in on the background.

Most of you will be familiar with the concept of investing with an institutional investor. This could range from investing in retirement funds, equity funds, unit trusts, etc.

Now I’m sure you realise these funds invest a lot of, if not all, the money placed with them in the stock market. The idea is these investment professionals will wisely invest your money in the market and grow it over time.

Now they don’t do this out of the pure goodness of their hearts…

Rather, they invest your money for you and charge you a management fee. On top of this management fee, many of these institutions will charge a performance fee. This is an additional bonus amount paid to the fund managers for achieving certain performance targets.

This makes sense and seems reasonable in that the fund managers are incentivised to deliver to you the best returns on your money. Should they deliver a good performance, they are rewarded with a performance bonus.

You're happy because your money has grown and the fund managers are happy because they've received their bonuses. It’s a win-win situation.


Or is it?

There is a small issue that complicates the simplicity of this win-win system.

The issue I’m talking about concerns the exact timing of when your investment's performance is measured.

Most of us have experienced or at least heard of the often-quoted experience of cashing in your investments with one of the institutional fund managers.

The returns you see on your quarterly statements are solid, often fantastic. And then when you want to cash in, you're told: "You were unlucky with your timing. The market is experiencing a minor pullback and your returns are not quite what you thought they’d be."

Now I’m not looking to have a moan about investment funds. Rather I want to show you how the timing of their performance measurements can give you a great trading opportunity

Many investment funds often perform a function, commonly referred to as "window dressing".

What is window dressing?

Window dressing is the practice, denied by all but done by many, where the funds will try to push the price of shares they hold, just before their performance measurement period. By doing this they improve the returns on their investments, just in time for their reporting period. Better returns mean better fees and bonuses.

What does this mean for you?

These days most funds report on a quarterly basis. And most follow the quarters of a calendar year.

This means the end of March, June, September and December are the most likely times when window dressing will occur in the markets. What you're likely to see is the market rally higher than it probably should in the last few days of each of these months and remain high for the first few days of the following months.

This is due to all these funds pushing the prices a bit higher to improve the returns they will publish in their quarterly reports.

As a trader this ‘artificial’ price movement presents an opportunity

When you're heading towards the last couple of days prior to quarter end it's a good idea to look for large cap shares the institutional funds are invested in. You want to find shares you feel are potentially undervalued. Having found these shares you'd want to go long (buy) using single stock futures, CFDs or spreads. Using geared products like these will maximise the returns on your short-term trades.

As the funds push the prices up, you can sit back and watch as they do the work for you and help you pocket some healthy gains.

Having held these trades for a couple of days to the end of the month (quarter), you should look to "cover" (sell) your position and bank some gains within the first few days of the following month. You want to do this soon after the end of the month because, if the share prices have been artificially inflated, they will start to pull back shortly after quarter end.

Remember to be on the lookout for this conspiracy heading into the next quarter end. I’m sure you’ll see a chance to bag some great gains.