Sell Your Mutual Fund in 4 Steps
My elderly father in law called last week worried because his bond fund had declined in value. Although he is financially set, he does not like to see his investment decline in value. (Who does?) He purchased this bond fund decades ago and has enjoyed years of appreciation as he reinvested the dividends and capital gains. In the past several years, as interest rates dropped to historical lows, the share value inched up each month. This month the trend reversed! His fund dropped $1,000 in value from the prior month.
Committed to helping him decide what to do and knowing that as interest rates continue to rise, the value of the bond fund will drop, I suggested selling the fund. I explained that bond prices move in the opposite direction of interest rates. As long as interest rates rise, the bond fund will likely decline in value.
His next question was, “Who will I sell the fund to?” I responded that the mutual fund issuer will buy your shares back from you. It was then that I realized there are probably others that bought a mutual fund in the past, and don’t know how to sell it.
The next day, I called the fund company on his behalf. We got my father in law on the phone for the conference call and completed the sale in less than 10 minutes!
How to Sell A Mutual Fund
Step 1: After you decide to sell, gather a recent fund statement, either paper or online from the mutual fund company. The statement will list the account number and the mutual fund information including number of shares and value on the date the statement was issued. Be aware that you might owe a redemption fee when you sell the fund. Whether you owe a redemption fee or not depends upon the type of fund you own and how long you’ve owned it. Ask the representative at the mutual fund company for fee clarification when you call.
Step 2: Find the phone number on the statement and call the mutual fund company. Keep the statement and your social security number handy.
Step 3: Inform the mutual fund representative that you would like to sell all or a portion of the shares in your mutual fund. She will advise you that taxes may be due on the difference between the redemption value and cost basis (amount you originally paid plus any dividends and capital gains you received) if the fund increased in value. Ask the agent if she has the cost basis of the shares, that makes it easier to figure out the tax owed come April 15th. If the fund rep doesn’t have the cost basis, check the fund’s website or check your own records for original purchase date and cost. If the fund has declined and is worth less than you originally paid, you may be able to deduct the loss on your taxes.
Step 4: Tell her how you would like to receive the funds, either deposited into a bank account or a check sent by mail. The Securities and Exchange Commission usually requires that the funds be paid within seven business days.
Now, just wait for the money to arrive. How easy was that? If you have questions about selling a fund, feel free to ask in the comments section, I’ll respond.
Where do you hold your mutual funds? Workplace retirement account, full service brokerage company, discount brokerage company, or with the fund issuing company itself?
image credit; google images njfunds dot com