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Ep23 “When Banking Fails” with Amit Seru

All Else Equal: Making Better Decisions

00:00

The Instability of a Mutual Fund

In many ways, the fund we just described has some eerie similarities to the way that banking is done today. When people think there's something wrong with this fund, with this bank, they want to be out first and that's what we call a bank run. What makes this investment vehicle a terrible idea is the instability. In general, a far better idea is to say you only can withdraw your money at the current value of the fund, just like a mutual fund.

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