A mutual fund consists of a collection of stocks, bonds or other types of investments that people can purchase shares in. Similar to how you trade a stock, you can buy or sell shares you own in a mutual fund. To get out completely, you simply sell all of your shares. If you really want to be a sell-out, proceed with caution. There are several considerations, particularly tax implications and how to handle the proceeds of the sale, to take into account.
Step 1
Contact the firm you have your mutual fund account with. You can find their contact information on the statements they send you via email or snail mail. Alternatively, you can log in to your account with your user name and password if you have online access.
Step 2
Place an order to sell the shares you own in the mutual fund you wish to get out of. The type of account you have dictates the number of options you have to unload shares. Most firms provide online access. In this case, you can view your account online and place a trade to sell all of the shares you own in the fund. Some firms allow you to call in or use an automated telephone system to request an order to sell mutual fund shares. In either case, you'll indicate the number of shares to sell or simply select "all shares" and the firm will complete the transaction when the stock market closes that day or the next day if you placed the request after market hours.
Step 3
Decide what to do with the proceeds of your sale. If you conduct the transaction in a brokerage account, you can let the money sit as cash, reinvest it or have your brokerage send you a check or electronically transfer the money to your linked checking or savings account. If you are selling the fund directly through the mutual fund company, they will require that you reinvest the money with them in one of their funds or another security or take the cash using one of the two above-mentioned methods.
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Tips
- If you sell a mutual fund through your brokerage account or with a mutual fund company other than the one that runs the fund you are selling, you will typically pay a commission charge. While these charges vary from firm to firm -- and even account to account -- you generally pay less to execute an online trade and more if you use a telephone system or live broker. If you sell the fund through the company that runs it, the trade generally goes off commission-free.
- If you hold the mutual fund you wish to get out of with the firm that runs it, you can mail in your instructions to sell your shares. Some firms require a signature guarantee from a commercial bank on the form you send in if you exercise the snail mail option. This practice guards against fraudulent and unauthorized withdrawals from your account.
- If sell the shares in a taxable account, you must report the trade to the IRS at tax time. If you sold the shares for more than what you bought them for, you have incurred a capital gain. If you sell them for less than what you purchased them for, you incur a capital loss.
Warnings
- The U.S. Securities and Exchange Commission warns that some mutual funds charge a redemption fee of up to 2 percent when you sell your shares.
- If you sell mutual fund shares you hold in an IRA, your IRA custodian -- the firm you hold your account with or transferred it to -- will generally leave the proceeds in your account as cash unless you instruct them otherwise. You have three general options. You can let the money sit as cash. Reinvest it within your IRA. Or receive some or all of the proceeds from the sale of your mutual fund. If you take this option, the IRS may require that you pay applicable taxes and penalties depending on the circumstances surrounding the distribution. Refer to IRS Publication 590 or contact your tax or financial advisor to evaluate your situation.
Writer Bio
As a writer since 2002, Rocco Pendola has published numerous academic and popular articles in addition to working as a freelance grant writer and researcher. His work has appeared on SFGate and Planetizen and in the journals "Environment & Behavior" and "Health and Place." Pendola has a Bachelor of Arts in urban studies from San Francisco State University.