The liquidity of mutual funds is a valid concern for any mutual fund investor. The ability to redeem mutual fund shares into a cash position quickly is one of the flexible features of mutual fund investments. Investors holding Fidelity Investments mutual funds have the advantage of being part of a large investment firm with trillions in assets under management (AUM).

Fidelity Mutual Funds

The large size of Fidelity Investments is reflected by its holdings and assets. Fidelity holds over 350 different types of mutual funds in its vast selection and has been in operation since 1946. Its stability is evident in its long history and the growth of its mutual fund family. Fidelity has over $2 trillion in AUM as of 2015, so it is one of the largest mutual fund investment groups. It is also well known for its extensive market research, which allows mutual fund managers to react quickly to changing market conditions.

Understanding Mutual Funds

As with all mutual funds, the share price is determined at the end of each trading day for a net asset value (NAV) based on the underlying holdings in the mutual fund portfolio for that day. The snapshot of the mutual fund portfolio may contain a mix of stocks, bonds and short-term securities that determine the mutual fund share price. The investor learns the trade price the following day.

Mutual fund portfolios are as liquid as their underlying holdings. For example, if you hold a Fidelity money market mutual fund, the portfolio holds short-term securities that can be converted quickly to cash. If you hold a Fidelity equity mutual fund, there may be underlying stocks and securities in the portfolio that could be thinly traded.

SEC Regulations

The Securities and Exchange Commission (SEC) sets regulations that govern money market mutual funds and provides a structure of liquidity for investors. One of the regulations includes Rule 2a-7, which defines liquid assets. The rule requires money market funds to hold underlying investments that meet the standard for credit ratings and short-term maturities.

Other equity mutual funds attempt to be fully invested and may only hold a small cash position that could vary from 1 to 5% of the underlying portfolio. For example, the Fidelity Growth Company Fund is a five-star Morningstar-rated equity mutual fund that has a cash holding of 0.18%. The top holdings of the fund include Apple, Salesforce.com and Amazon.com, which offer a large market for the portfolio manager to trade. The fund has $40.7 billion in total assets.

Fidelity Advantages

The overall strengths of Fidelity Investments mutual funds include a large investment firm with trillions in AUM plus a long history of high-quality portfolio management. The liquidity of each Fidelity mutual fund varies depending on the type of fund; a money market is more liquid than an equity mutual fund.