Mutual fund families that are most tolerant of timing

January 27, 2013 8:04 PM

Hello. I'm interested in mutual fund timing, but most fund families (Pro Funds and Direxion notwithstanding) hate the idea and throw up all sorts of limits to prevent one from doing this. Are there any reasonably tolerant fund families out there? I'm looking specifically for minimal "minimum time held" and the ability to bounce back and forth between funds, especially between a money market fund and bond funds. I know this is a bit of a Hail Mary, so thanks for any info.
posted by mrhappy to work & money (10 answers total)

It seems if you want to do rapid trading you should be looking at ETFs instead of mutual funds.
posted by Dansaman at 8:06 PM on January 27 [5 favorites]

Yes, mutual fund timing has a problematic history. You might be better off searching for another vehicle. Dansaman's suggestion of ETFs seems like the logical place to go.
posted by alms at 8:16 PM on January 27

Yeah, I would think that jumping in and out of funds would result in not making more money. They are trying to outperform the market already, so trying to outguess them could easily lead to peril. It just doesn't make sense- mutual funds are kind of by definition hedges from the ups and downs of a market, so if you want to leverage the ups and downs, you're better off with something else. If you are actually better at timing than the fund manager(s), you should be picking stocks.
posted by gjc at 8:26 PM on January 27 [2 favorites]

I don't think the OP is talking about that sort of "market timing", I think mrhappy means something more like market timing or trend following using mutual funds. If so, I think ETFs are probably the way to go, yes. Mrhappy, is there a specific problem that ETFs don't address for you?
posted by Joey Buttafoucault at 8:27 PM on January 27

The one I worked for had a whole department that did nothing but try to stop timers.
posted by cecic at 8:30 PM on January 27

Oh, and if it's brokerage fees you're concerned with, you may be able to find a place that allows free trading in their house funds or a certain number of associated funds. Like at Vanguard, you can trade their house ETFs up to 24 times in a rolling 12-month period. Or, TD Ameritrade lets you trade a lot of funds commission-free, as long as you hold 30 days. Etc.
posted by Joey Buttafoucault at 8:37 PM on January 27

No reason to do this with mutual funds. If you are sold on the idea, ETFs are a more efficient vehicle. There are very very few mutual funds worth buying for any reason now that ETFs are available in just about any flavor.
posted by jcworth at 9:22 PM on January 27

I didn't explain this properly. The amount invested is enough to forego any loads on a loaded fund, so the account would be trading without any transaction costs (excluding 12b-1 fees.) But FINRA has pretty much banned anything that looks remotely like frequent trading. Thanks for the replies, and it's back to the drawing board for me...
posted by mrhappy at 9:42 PM on January 27

The reason for this is that mutual funds are kind of like CDs at a bank. They depend on having consistent cashflow to make the trades necessary to increase value. If they allowed frequent trades, this consistency would be lost and they would have less flexibility to work their magic.
posted by gjc at 10:15 PM on January 27

FYI the reason it is frowned upon is that a mutual fund assumes that all of the owners share expenses mutually. Allowing a few owners to trade in and out rapidly to take advantage of daily swings incurs costs that are paid disproportionally by the other fund owners. While not wholly illegal, back in 2001, i think, a few Mutual fund companies were fined heavily for violating their own policies that prohibited such trades.
posted by Gungho at 7:13 AM on January 28