Window dressing is an arguably shady practice employed by many mutual fund managers. Mutual fund managers typically report to the public on their funds' holdings once per quarter. Managers want to look savvy to impress their existing shareholders and attract new shareholders. Therefore, they'll sometimes sell lackluster investments they've held for a while and buy recent stellar performers -- just so the fund's holdings on the day of record look good.
For example, the Kitten Kaboodle Fund (ticker: MEOWX) might have spent the last few months languishing. Rather than reveal that it holds large positions in poorly performing companies, the manager might sell off some regrettable holdings and load up on recent market darlings to look good. This is window dressing.
You might be pleased to see Wal-Mart
For an eye-opening education on mutual funds, read John Bogle's Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor. You can also learn more about investing in mutual funds in our Mutual Fund area, and zero in on our index fund information there. Additional info about funds and stocks is found in our Investing Basics area.