niaj asked:
I have recently invested in a mutual fund but there have been rumors that the bank might go bankrupt. In that case what will hapen to the investments that I have made? Also as per the policy, I cant pull out my money for a minimum period of 3 years.
I have recently invested in a mutual fund but there have been rumors that the bank might go bankrupt. In that case what will hapen to the investments that I have made? Also as per the policy, I cant pull out my money for a minimum period of 3 years.
It doesn’t matter. The company(bank) running the fund must keep customer’s money separate from company money and can’t use it for company purposes. It can only be invested for the customers’ benefit. If the company goes bust and is liquidated, the fund management business would be a valuable asset taken over by some other company and your account, with all the assets, would be transferred with no loss to you.
You have to be more specific, in which country do you live?
Many people get confused on this subject, but generally don’t have to worry.
When a mutual fund (or any investment/brokerage) company goes bankrupt, your investments are not worthless – they have the same value as what is published/posted daily. The mutual funds run by the company are not worthless – as the companies comprising the funds still exist and their stock still trades. If the investments in the funds go to zero, or the fund itself is insolvent (for example, something like a hedge fund which goes long, uses margin to leverage their bets) then your investment is worthless.
If the mutual fund is run by the bank, and invests in products of the bank (not stocks and bonds which have readily available pricing information, but maybe their own mortgages or loans they make), then you may have more difficulty.
However, for all known mutual funds (have symbols where you can look up the daily NAV), if the sponsoring company goes bankrupt, your investments (the actual mutual fund you own) are insured. It may take you some time to get the money out as the government steps in, but you will get the funds back.
Many funds which have time locks on contributions do have mechanisms in place to withdraw even prior to the 3 year (or whatever you agreed to). You may have to pay a fee or penalty for getting the money back, but, if you are so concerned about the solvency of the fund, the expense of pulling your money out might be worth it for peace of mind. You might want go to the bank and discuss your options with them. Regardless of the rumors, if the doors are still open, they have to service you as a customer and give you valid information regarding any products you own with them.
First thing is to be clear on is whether it is a bank mutual fund, or one of the thousands of mutual funds run by other companies, but just sold to you through your bank. The latter is the better of the two – but go and talk with them and say as you may know there are rumors…please tell me if the bank goes bankrupt, what happens to my mutual fund investment.