Mutual Fund Withdrawal Guide: A Step-by-Step Approach

Mutual funds are a popular investment vehicle among all types of investors and savers. They can help a portfolio grow, they can supply income, and they can help an individual save for retirement. Investing in a mutual fund is quite easy. However, there are some things to know and consider about withdrawals.

Step 1

An investor should call his stock broker, financial adviser or the fund company where the mutual fund shares are being held. Next, the investor should explain the reason for the call, instruct the broker to sell a certain number or certain dollar amount of the mutual fund, and then advise how the proceeds should be handled (a check can be mailed, wired, picked-up or transferred).

Step 2

The investor must call in the sale order before 4 p.m. Also, time should be allotted for the trade to be entered and for any questions that need to be answered or that are posed. Since mutual funds are priced at the end of the trading day, the exact price of the mutual fund cannot be determined at the time of the sale, so it is wise to sell a few more shares or dollars than needed. Also, if the mutual fund has a redemption fee or a sales charge, that should also be taken into consideration.

Step 3

Mutual funds settle differently than stocks and bonds. Sells of money market mutual funds settle the same day; however, checks and wires are not sent until the next day. Sells of equity and bond funds settle in one business day, so funds are available in two days from the sale.

Step 4

Keep records of all mutual fund transactions, (buys, sells, reinvestments, redemptions and/or exchanges). This information will be needed for tax purposes.

Tip

Consider market conditions when selling a mutual fund. While it is not wise to try to time a market, it is possible to get a read on if a stock, bond or commodity mutual fund will close widely up or down depending on the overall market and trading conditions.

Warning

Don't sell a dividend if possible. Check to make sure you are not selling mutual fund shares right before or close to dividend payments. It just might be worth waiting until after the dividend is paid to sell, but keep in mind the fund share price will be reduced by the amount of the dividend. Your financial or tax adviser can help here.