Wednesday, September 30, 2015

Some Funds Are Not as Liquid as They Appear

Two observations about liquidity or illiquidity. First, the vast majority of investors doesn't or doesn't care to understand what lightly traded means. It means, no bid/ask and buyers/sellers, basically no market during a crisis of confidence or panic. Second, human behavior, the force the drives the decision-making of the majority, doesn't care about liquidity until they, the public, can't access or withdrawal their money. Public discussions about liquidity; therefore, come after the crisis. This why humans write legislation to protect everyone against the next crisis after the present one has emptied the majority's investment accounts.

Headline: The New Bond Market: Some Funds Are Not as Liquid as They Appear

Some of the largest U.S. bond mutual funds have invested 15% or more of their money in rarely traded securities, a practice that runs counter to long-held Securities and Exchange Commission views on the funds, an analysis by The Wall Street Journal shows.



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