Scat Fingers grabbed a stool at the Wannabe Blues Club and ordered a double latte. The Foolish Four was busy on stage, smoky haze separating Scat from the band. The bartender, with a goatee in need of trimming, reluctantly delivered the foamy caffeine concoction.

"Hey Barcat, how are the greens on tap flowing tonight?" Scat asked. "That piano player is butchering the tusks, yet this joint is Sardine City."

The bartender gave him a strange look, shook his head, and walked away. Scat grabbed his coffee and set out to find a free table stageside. On this busy night there was no such luck, and when Scat looked back at his original barstool, it too was already taken.

"Two is company, full capacity of 800 is a crowd," said a man at his side, also nursing a latte.

"You said it chummy-o," Scat said. "Regret beckons me back to my pad to enjoy some vinyl oldies. This is one instrumental zoo too many, and this cat don't take kindly to cages."

"I would be going home too except I'm here on business," his new friend explained. "The name is Dr. Mortimer Stocktout and I'm trying to work out a deal to take this chain of blues clubs public."

"Equity heaven, yet strumming all C-chords, my doc man," Scat said as the two negotiated an awkward handshake. "Just make sure they obit the quartet. It's a murky musical cesspool."

"Those guys are Fools," Mortimer explained. "They're singing the praises of looking after your own finances. The nerve! Touring the country, filling up venues! Well, ignore them. Once we take this company public we will replace this sorry lot with The Fund Four."

Scat nodded his head, not sure why. While he was a man of modest means, Scat had managed to stash away some money over the years. Having overcome the notion that the stock market was too mainstream for his eccentric state, he was beginning to ponder whether he should find a broker to manage his money.

"The Fund Four will sing an entirely different tune," Mortimer said, his eyes ablaze. "For starters they will tout, ahem, discuss, Mortimer Aggressive Growth."

Mortimer was proud of the fund that bore his name. He was quick to tell Scat how last year, investors got a capital gain distribution of 20% of the net asset value.

"That slams shut the terrier door on a money market fund," Scat said.

"Indeed," the stock-hyping Doc replied. "With a 20% yield, that's better than third-world debt!"

The band's set came to a screeching halt as Motley Fool, a poor piano player even by his own admission, stepped away from the keyboard and raced to the edge of the stage with some sheet music in his hand.

"Mortimer, Scat, take a look at this and tell me what you see."

He handed over the sheet music. Scribbled between the lines of "Foolish Rhapsody" was the difference between a capital gains distribution and an actual dividend. Mortimer was up to his old tricks of deceiving to land a sale.

"Woo-hoo Mortimer, looks like treble," Scat laughed.

"And crescendo too," Motley said.

You see, while it's true that Mortimer's fund did pay out a 20% capital gains dividend it has no bearing on the actual performance of the fund because:

1) It is simply the net product of realized gains over the course of the year. These stocks may have been held for a long time and the company may still own many unrealized losses in poor investments

2) The 20% distribution is accompanied by a 20% drop in the mutual fund share price. There is no free lunch.

3) It could have attained that high dividend by leveraging the fund to load up on unrated junk bond debt, with the end result being a 20% interest payout.

4) Both 1 and 2.

Enter your selection in the field to the lower right, and get immediate feedback on the answer!

"You're Coda, Mortimer!"

The answer is #4. A capital gains distribution is not an indicator of performance. It is also a zero-sum game since the price of the fund will fall by the exact amount of the dividend.

As SEC officials stormed the club to arrest Mortimer, he darted out through the back alley, where the muck and filth served as appropriate refuge.

Inside the club Scat approached Motley for a friendly handshake.

"You know Motley," Scat started. "you're mighty alrighty in my papyrus. You may be a puppy know-nothing when it comes to the keys of ivory, but man, you're one smooth cat when it comes to the keys of investing."

"Thank you," Motley said. "I think."

With that Motley tipped his hat and walked away, leaving Scat with a new tune running through his head.

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