How Liquid Is Your Mutual Fund?

Mutual fund liquidity is an important factor to consider as an investor. The liquidity of a mutual fund determines how quickly you could sell your shares of the fund if you wanted or needed to. Here are a few things to consider about mutual fund liquidity and how it impacts you as an investor.

Mutual Fund Liquidity

As an investor, you like to have some level of liquidity in your investments. In case you ever need money immediately in an emergency, it is good to have some investments that can be quickly sold. Many popular mutual funds can be bought or sold at any time. However, some mutual funds might require you to wait before you can sell them. For example, a prime-rate fund utilizes commercial loans to get the returns for the fund. As a result, you may not be able to sell your shares in such a fund except on a quarterly basis.

Costs of Liquidity

While it is nice to have a mutual fund that could be considered liquid, it may cost you as an investor. Some of the funds that bring in the best returns, such as a primary fund, are not extremely liquid. Therefore, you may be missing out on bigger returns just so that you can have easy access to your money.

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