Mutual Fund Exchange Definition


A mutual fund exchange is simply a streamlined way to simultaneously buy and sell mutual funds. Not all mutual funds can be exchanged, and there may be tax consequences to the transaction.

Mutual Funds

  • A mutual fund is a pool of money from investors that is collectively invested for the benefit of all shareholders.

Mutual Fund Families

  • The list of all mutual funds offered by one particular investment management company is known as a mutual fund family.

Mutual Fund Exchanges

  • Mutual funds in the same family can be "exchanged," or swapped. In an exchange, one mutual fund in the fund family is sold while another one is bought.

Exchange Fees

  • Usually, there are no fees to exchange funds in the same family, as there might be if you purchased a fund outright.

Taxation of Exchanges

  • Exchanges are taxed as if the funds were bought and sold individually. If you are exchanging out of a fund that has a gain, you will be required to pay capital gains taxes on that exchange.

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