So. I guess you money is as safe in an ETF as a regular mutual fund (with respect to liquidation of the fund).

Of course, if an ETF was liquidated you would get the NAV of the underlying fund, not the market price.

I am still waiting to pull the trigger on the funds.

VTI and VIG also look like possibilities.

My concern now with ETF’s is what if the company decides to close them? What happens to my money? At least in the case of the e*trade or other mutual funds I will get my money back that I have invested. With an ETF, it is essentially a stock, so would I be out completely if Vanguard for example decided to shut down their ETF, right?

Wes

E*TRADE does raise capital, because all the client money from this is going to go into the sweep accounts. I have to admit I really don’t know the full extent of what they can legally do with that money, but it really is under their management. For example, I believe they could invest it in E*TRADE bank money market accounts overnight, and that would help the bank’s reserve levels. Again, I’m not sure, but I do know at the very least that it would help capitalize their money market funds. I think people would be really scared to know what’s going on behind the scenes to keep the money market funds from breaking the buck.

By the way, I’m the last person anybody should listen to about the market, and have no idea which way it’s going to go, other than that it will be volatile. But for the record, investing because “everybody is in cash” doesn’t make sense. The stock market is just a router of money and shares, neglecting stock repurchase and issue. There is no such thing as “everybody selling.” Every sale is a buy, every dollar in is a dollar out. If you want to argue that consumers are dumb money, and so looking at their cash levels is meaningful, then fair enough. But if this whole debacle has taught us anything, it’s that Wall Street can be pretty stupid, too!

I agree that this is no way to treat customers, but as I said, I think they are doing it out of desperation. I don’t think this is at all a good sign for E*TRADE. At the very least, it means they couldn’t find a buyer the business.

As for when to sell, I don’t think it matters too much. E*TRADE’s $500M isn’t going to move the markets, so that’s not an issue. It really comes down to “which day this week do you think the market will be the highest?”

I used to be allocated 10% SPX and 15% Russell 2000. I think I’m going to collapse those two holdings into a “US Domestic Equity” for 25% of the portfolio using some kind of Wilshire 5000 vehicle. BTW, if you’re on the sidelines, the next month or two might be a good time to get in…”Indeed, while no one knows the exact size of these accounts, rough estimates suggest they easily top $600 billion. At one brokerage alone, E-Trade (ETFC: 0.87, -0.02, -2.24%), 29 percent of all consumer assets were in cash by last fall, up from 17 percent in 2007.” (http://www.smartmoney.com/Investing/Short-Term-Investing/Your-Money-Swept-Away/)

btw, I was out at Lincoln Lab last September for a conference…I’m a graduate student myself.

The question is: Is it better to wait until the liquidation date or sell the funds now? Is e*trade the company going to be around much longer?

It should be interesting to see what happens.

While I think it’s true that they aren’t making much money from the funds, especially with the market this low, I just can’t see a firm liquidating funds like this under normal circumstances. I may be proven completely wrong, but my gut instinct is that this is a move of desperation. Half a billion dollars is roughly what they were asking for under TARP, as I recall. Maybe they got word the funding wasn’t coming, or that the government’s terms were too onerous. Maybe there has been a run on their money market accounts, and they need to raise cash quickly. I don’t know, but this doesn’t seem at all like the way a healthy brokerage company handles closing down a mutual fund unit.

I’ve been out of the general market since January (2008) and started going short that March (a bit early, but better early than never), so I’m not looking for any SPX exposure right now. My E*TRADE index position was $700 worth of automatically invested shares I had left over that I couldn’t sell at the time (damn short term penalties) and I forgot about. Now I just use E*TRADE as my bank. My only long equity investments are in the Hong Kong market using their global trading platform, and a tiny bit in Germany. (Fun, but a rip off, and I’m barely treading water.)

I’m not sure if I’ll stay short any longer, but once I exit, I think I’m just going to watch from the sidelines with a beer. I wouldn’t touch the stock market with a ten foot pole right now. Maybe it will have some incredible rallies, but I just know I’m not even half clever enough to successfully trade the market that is coming. But if I were going to go long the SPX, I’d probably use either Vanguard or SPY. If you’re not going to be making a lot of small investments, ETFs are actually a pretty good deal.