How are mutual funds held in 401k protected?
First you have to understand what a mutual fund is…it’s a collection of invested dollars that are in turned used to buy stocks according to a certain investment profile. The value of the fund is the value of the shares less fees that the mutual fund charges for that day. That’s how the company makes money….the fees they charge. No money or assets of the mutual fund are lent to or borrowed by the mutual fund company. They are kept 100% seperate. Lastly, they are not considered part of the assets of the company. If a mutual fund was invested in mortgage securities the only thing would happen is that the fund would lose money. If it were 100% invested in mortgage securities then market value might go to zero but that’s life. Assumption is that you knew the risk of that when you invested your money in that fund. If the fund company goes under it has zero impact on the mutual fund itself unless the mutual fund is invested in the fund company but there are rules against that. That’s wher
