The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its funds are very liquid, with shares being sold once a day. It manages dozens of funds with varying investment objectives to fit any investor profile ranging from managed funds to index funds that track specific indexes such as the S&P 500.

Mutual funds are some of the most prolific investments found in the marketplace. One of the key questions investors ask before committing capital to such investments is about their liquidity. In other words, an investor wants to know how easily he can sell his shares and redeem them for cash.

Mutual Fund Basics

Like all mutual funds, Vanguard funds trade once a day at the close of the market. The net asset value NAV is recalculated, and this is when shares are bought and sold. Unlike stocks that can trade almost instantaneously, mutual funds have a slight delay, but they are still one of the most liquid types of investments. Once shares in a mutual fund are sold, it generally takes just a few days for an investor to receive his capital.

One thing investors need to watch for is fees associated with buying and selling in a Vanguard mutual fund. All funds, even the passively managed index funds, have expense ratios associated with them, but some also come with purchase fees, redemption fees or in some cases, both. The purchase fee ranges from 0.25 to 1% up front on certain funds, while others can charge you on the back end with a 0.25% redemption fee. The funds might be liquid, but it can be costly if you trade in and out of these types of funds often.

The Advisor Insight

All mutual funds are liquid in the sense that they are easy to buy and sell. At the end of each trading day, all mutual fund orders are executed at the fund's net asset value. Vanguard or any other mutual fund will be just as liquid as a stock. The only difference being that a stock is sold at different prices over the course of a trading day, whereas mutual fund orders are cleared only once per day. There are different redemption fees according to which share class of the fund you buy, and this will determine what and how much you pay in sales charges. Additionally, mutual funds are required to maintain liquidity and the capacity to accommodate withdrawals. Funds typically have to keep a portion (around 8%) of their portfolio as cash.


Rebecca Dawson
Silber Bennett Financial
Los Angeles, CA