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“Run on the Fund”: The Big Risk of (Open End) Bond Mutual Funds. What to Look For and What to Do

hank
edited January 2020 in The Bullpen
(Excerpt) “First-Mover Advantage” in a “Liquidity Mismatch”: How slow-poke investors in conservative-sounding mutual funds can get their faces ripped off.When it comes to conservative-sounding open-end mutual funds, particularly those invested in bonds, loans, thinly traded stocks, real estate, and the like, “first-mover advantage” means: When there are signs of trouble, get out early. Because if you don’t, you can get your face ripped off ... “ article

My own take is this is not limited to bond funds. Certainly, equity funds can face even greater runs. I think what they’re getting at is that because “bond fund” sounds inherently safer than ”stock fund” many investors don’t appreciate the risk they’re undertaking.


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