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Posted by s o on April 25, 2007, 7:27 pm
hi,
have a basic question here. Let's say I'm investing my money in Fund
ABC by company XYZ thru ETrade. what's going to happen to my money if
company XYZ goes out of business?
thanks
s o
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Posted by Sandra Loosemore on April 25, 2007, 7:47 pm
> have a basic question here. Let's say I'm investing my money in Fund
> ABC by company XYZ thru ETrade. what's going to happen to my money if
> company XYZ goes out of business?
Most likely, if company XYZ goes out of business, company UVW will buy
out their assets, and you will then own shares of Fund ABC by company
UVW. Maybe company UVW will then decide that Fund ABC has a lot of
overlap with Fund DEF that they already own, and propose to merge
them. Or they might appoint new managers, change the fees, etc. If
any of that stuff happens, you'll get plenty of notice and time to
bail out of the fund if you choose. The value of mutual funds is
based on the underlying assets, and isn't suddenly going to disappear
because the fund management changes.
-Sandra the cynic
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Posted by catalpa on April 26, 2007, 4:58 am
> have a basic question here. Let's say I'm investing my money in Fund
> ABC by company XYZ thru ETrade. what's going to happen to my money if
> company XYZ goes out of business?
>
If company XYZ is in trouble then it or its funds will most likely be taken
over by another mutual fund management company.
You might want to consider another question: "What happens to my money if
fund ABC invests in overvalued assets?". To find the answer to that question
Google on the search words: heartland high-yield municipal bond fund .
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Posted by PeterL on April 26, 2007, 12:01 pm
> hi,
>
> have a basic question here. Let's say I'm investing my money in Fund
> ABC by company XYZ thru ETrade. what's going to happen to my money if
> company XYZ goes out of business?
>
> thanks
> s o
Your assets are being held by an independent holding company.
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Posted by Tad Borek on April 26, 2007, 1:15 pm
s o wrote:
> have a basic question here. Let's say I'm investing my money in Fund
> ABC by company XYZ thru ETrade. what's going to happen to my money if
> company XYZ goes out of business?
While it may not look this way, from a legal perspective Company XYZ is
just a money manager that's been hired by the board of directors of Fund
ABC to run the mutual fund. Fund ABC's assets are kept completely
separate from Company XYZ's assets. So if Company XYZ goes out of
business it should have no effect on the assets of Fund ABC.
This is why you never see mutual fund failures, it really can't happen.
They can be unsuccessful and perhaps need to change names or merge into
another mutual fund, but you're not going to pick up the paper tomorrow
and see that your mutual fund was now worth zero because the fund
company filed for bankruptcy (as could happen with an individual stock).
As others have posted the much greater risk is that Company XYZ simply
does a lousy job managing Fund ABC, and you lose money that way -- from
investment losses.
-Tad
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