Stock Market Trading Halt - Impact to Mutual Funds?

Other discussions not related to the Permanent Portfolio

Moderator: Global Moderator

Post Reply
User avatar
Hal
Executive Member
Executive Member
Posts: 1352
Joined: Tue May 03, 2011 1:50 am

Re: Stock Market Trading Halt - Impact to Mutual Funds?

Post by Hal »

Aussie GoldSmithPP - 25% PMGOLD, 75% VDCO
Kbg
Executive Member
Executive Member
Posts: 2815
Joined: Fri May 23, 2014 4:18 pm

Re: Stock Market Trading Halt - Impact to Mutual Funds?

Post by Kbg »

Think of a mutual fund as a market with only one price a day which is derived from the sum total of all official closing prices of the fund's components. This is why mutual fund "trades" happen after market hours.

However, normal rules often aren't applied during highly volatile disrupted markets. Accordingly, to find out what would actually happen you would need to dig into the prospectuses of the two funds involved. But even then, there is some latitude usually for the fund manager in dealing with these situations and you can guarantee they will be driven by the risk mitigation needs of the company/fund not you. So you would also need to read up on what the discretionary powers of the fund manager are.

Not satisfying, but this is why prospectuses are written and they are fund specific.

Market halts are also specific and vary between the large market makers (CME, NASDAQ, NYSE etc.(, the instrument involved and your brokerage's risk management policies and the associated account you have with them. (Retirement, regular, margin, no margin). There is also the impact of overnight trading which can be significant as well.

My strong advice...have a plan on what you would like to buy and sell...and just wait for the dust to settle a bit. When markets are disrupted, the #1 thing you should understand is that there is serious danger. If your knowledge of the markets is in-depth and you know what you are doing then OK, maybe be more aggressive...but I assume you also understand fully that you could get your head handed to you on a plate.

A recent example for me was doing some quick TMF trades where I knew based on the underlying treasury market that the spike up was simply not sustainable...these were good trades. And I can also tell you from personal experience that before I did know what I was doing I did have my head handed to me a couple of times for some not small sums of money when I was younger.

Refer to #1 thing again please.
Post Reply