How to sell mutual funds

A low performing mutual fund or an anticipation of higher risk might prompt one to cash in the funds. At time investors maybe in need of the investment money for different purposes. Whichever the case might be, it is very important for n investor to clearly know how to dispose of his/her investment whenever they want. The following is the procedure for doing this.

One of the most important things to clearly know is the fact that mutual funds are not synonymous with stocks. This means that a declining stock does not necessary mean the fund is under performing. You should clearly know that mutual funds are not singular entities but they are portfolios of financial instrument, which include the likes of bonds and stocks. A fund manager has selected them and he/she is responsible for managing them.

Whenever you are selling your funds, the following are some of the important considerations one has to clearly note

Back-end loads

For investors with a fund, which charges a back-end load, you should note that the total you will receive when selling your unit will be affected by this. Front-end loads are fee, which are charged when you will first be investing into this fund. When you have a front-end sale charge of 2% your investment will be reduced by this percentage when investing. When your fund has a back-end load of this percentage, this percentage will be reduced from the total redemption value. Many mutual funds usually have a back-end when you are liquidating your fund earlier.

Tax consequences

When mutual fund gain significant capital gain you might be subjected to gains taxes if the fund is hold within a taxable account. If you redeem units of a fund with a high value than the total cost, you will have a taxable gain.

Currently most investors don’t hold certificate which represents their shares. They mostly leave their shares with their broker, other entity or mutual funds. In this instance the averaging rule does apply.

When selling your mutual fund, the following are some of the essential steps to follow.

Contact your financial advisor/Investing company

You should get in touch with the advisor who sold you the funds or even someone within the investing company. For investor who bought them directly from a mutual fund company, they should contact them directly

Enquire about the fee they charge

An investor should note that there is a certain fee, which has to be paid when they want to dispose their mutual funds. When you bought a mutual fund with a differed sale, charge the investor will pay a sale charge for them to dispose the mutual fund. The size of the sale usually depends on how long you have held the fund and the company you are using

Decide how many units you will sell

The pricing of mutual fund is usually calculated at the end of the day. You will have to sign a form stating that you are willing to sell your current mutual funds.

Giving instruction on what to do with the money

The company or the advisor can send you the money in form of a


Deposit the money to your bank account

Use it to buy other mutual funds.