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The June publication of Smart Money magazine featured an article about the problem created for mutual fund managers when investors sell their shares in mutual funds. Fund managers are seeing bargain stocks they would like to buy but cannot due to the fund liquidations using the cash positions in the funds. Read this article for an excellent perspective on what can happen with mutual funds when markets go through corrections and how it can affect your fund’s performance even if you don’t exit the fund. Fortunately this is not the case with privately managed accounts since each account is managed individually however the high minimums often exclude this type of investment for many investors.
There is also an insightful chart comparing investor withdrawals over the past decade. As the saying goes a picture paints a thousand words. That is how I feel about charts. Have a look.
http://www.smartmoney.com/smartmoney-magazine/index.cfm?story=june2008-tied-up-mutual-fund-money
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