Hello, welcome to the class My name is sparkle Majumdar. Without any further delay, let's get started. Mutual Fund liquidations also referred to as full closures are never good news. liquidation involves the sale of all of the funds assets and the distribution of the proceeds to the fund shareholders. At best, it means the shareholders are forced to sell at a time not of their choosing. The worst it means the shareholders suffer a loss of capital and pay capital gains tax to.

In USA in 2016, nearly a quarter of the mutual funds got liquidated. No brainer mutual fund closes down, it can either liquidate the mutual fund or it can merge the mutual fund with another mutual fund. Generally, most dead funds are merged into another in the fund family. This route is easier for the shareholders because their money is immediately invested in a similar and often more successful fund. So, why does a mutual fund liquidate generally a mutual fund liquidates when the fund value drops drastically. So when the fund value drops drastically, it forces the investors who bought the fund when it was more expensive to sell at a loss.

Worse yet, the fund may have embedded capital gains, which can have immediate impact on the investor holding the fund in a taxable account. This occurs when a fund doesn't sell a stock that has risen in value since it was purchased. Another common reason for mutual funds liquidation is it's poor ranking. If the performance ranking is poor, the asset flows into the mutual fund reduces as investors choose not to buy into the fund. It also brings down the mutual fund management firms track record. If the firm has five funds, and four of them are doing well.

Closing the poor performer gives the firm a track record based on for successful funds. Who are performance also results in bad publicity, which can lead to large redemptions. As the asset base falls, the cost of doing business increases fund operates on economy of scales, with bigger being better for a cost saving perspective. As costs increases, it can become unprofitable the operator fund. fund terminations are common, particularly among new funds. If a fund doesn't gain popularity and grow during the first three years, it is likely to close several hundred funds close nearly every year during the late 1990s and early 2000s.

Niche funds are particularly vulnerable, as they are often invested in fads are focused on such a small aspect of the industry that there is a risk the concept will never catch on with the investors. So what are the warning signs, one should always look out for signs that a fund is a candidate for closure includes a big drop in performance that is sustained without recovering. A poor track record over several years is another warning. Because poor long term performance simply isn't appealing to investors. Maybe redemptions are another possible indicator. So what are the actions required on the part of the investor if one is invested in open ended mutual funds and the science of end coming, it is time to head for exit as fast as one can win all investors want to sell a particular Find the selling pressure tends to lower the funds price.

Getting out sooner than later can help get a better price. If one is invested in closed ended mutual funds, look at the underlying assets. If the fund is selling at a premium sell to maximize the payouts. If the fund is trading at a discount, one may want to hold because one will get paid on the full value of the assets when the fund value is liquidated. Thank you for listening