Mutual Fund Liquidity Ratio

AAA

DEFINITION of 'Mutual Fund Liquidity Ratio'

A ratio published monthly by the Investment Company Institute that compares the amount of cash relative to total assets held by a mutual fund. Equity investors use the mutual fund liquidity ratio to gauge the demand for shares and the bullishness or bearishness of portfolio managers.

INVESTOPEDIA EXPLAINS 'Mutual Fund Liquidity Ratio'

For example, if a mutual fund is sitting on a large amount of cash, the theory is that it is doing so because it is hard pressed to find quality investment opportunities; therefore, it has a bearish sentiment toward the market. Conversely, if a mutual fund is highly invested and has a very small amount of cash on hand, the theory is that it has found some excellent investing opportunities and is taking advantage of these opportunities by being nearly fully invested - that is to say, it is bullish.

VIDEO

RELATED TERMS
  1. Asset

    1. A resource with economic value that an individual, corporation ...
  2. Bear Market

    A market condition in which the prices of securities are falling, ...
  3. Information Ratio - IR

    A ratio of portfolio returns above the returns of a benchmark ...
  4. Liquidity

    1. The degree to which an asset or security can be bought or ...
  5. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  6. Portfolio Manager

    The person or persons responsible for investing a mutual, exchange-traded ...
Related Articles
  1. Mutual Funds & ETFs

    5 Ways To Measure Mutual Fund Risk

    These statistical measurements highlight how to mitigate risk and increase rewards.
  2. Mutual Funds & ETFs

    Published Mutual Fund Returns Not Always What They Appear

    Survivorship bias erases substandard performers, distorting overall mutual fund returns.
  3. Mutual Funds & ETFs

    Pick The Winners At The Mutual Fund Track!

    For both mutual funds and racehorses, there's no surefire way to pick a winner.
  4. Mutual Funds & ETFs

    Morningstar's Stewardship Grade Scores Big

    Morningstar's service gives investors an idea how well fund companies are safeguarding their interests.
  5. Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

    Learn about the basics - and the pitfalls - of investing in mutual funds.
  6. Pimco has stabilized its Total Return fund, but its returns are still shaky and its sales load is still a fat one.
    Professionals

    A Look At Pimco's Total Return Fund Post-Gross

    Pimco has stabilized its Total Return fund, but its returns are still shaky and its sales load is still a fat one.
  7. 10 equity mutual funds bargains for any investor or financial advisor.
    Professionals

    10 Equity Mutual Fund Bargains

    10 equity mutual funds bargains for any investor or financial advisor.
  8. Chart Advisor

    A Total Stock Market ETF For Any Portfolio

    Utilizing index funds and ETFs, such as Vanguard's VTI, is one of the best ways for the average investor to track the broad markets and minimize fees.
  9. Trading Strategies

    What's the safest way to invest in high-yielding dividend stocks?

    Learn about some of the most important safety factors that you need to consider before you invest in high-yielding dividend stocks.
  10. Africa's economic growth and growing stability has gotten the attention of adventurous investors. What kind of ETF or mutual fund options are available?
    Mutual Funds & ETFs

    Destination Africa: These Funds Offer Easy Access

    Africa's economic growth and growing stability has gotten the attention of adventurous investors. What kind of ETF or mutual fund options are available?

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center