1. 113 POINTS
    Brandi Jo Newman
    Founder, BrandiJoNewman.com, Texas
    Mutual funds can be used for a margin loan - up to 50% loaned to you in exchange for the entire value of the mutual fund or portfolio. If the mutual fund value drops below 50% when you max out your margin loan, the loan can be "called" by the financial institution. You have about 10 days to make up the difference, pay the margin loan back or give up whatever value of the mutual fund you need to make the loan balance whole.

    If liquidity is what you need, you might want to get versed in the ways of leveraged cash value whole life insurance. It is much easier to create liquidity in these types of contracts and you don't have to pay anything back in a structured loan agreement.
    Answered on March 26, 2015
  2. 11773 POINTS
    Larry GilmorePRO
    Agent Owner, Gilmore Insurance Services, Marysville, Washington State
    A mutual fund is very liquid, you can usually cash out with a phone call. Now if you mean by liquidity what is the cost to do so, that is different. A front loaded mutual fund has no redemption costs normally as you have already paid the costs up front. Those costs are not returnable. A rear loaded mutual fund puts 100% of you funds into the investment, but if you redeem early (as in 5-10 years depending on the fund) you will pay some sort of cost to redeem. The exception to this would be the money market mutual fund as many of that type of mutual fund actually offer the ability to write checks from the account.

    Basically if you are worried about how liquid a mutual fund is, you should probably not be there. As with most investments, the plan should be long term. There are other places to place short term money.
    Answered on July 13, 2015
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