How to Include Load Fees When Redeeming Mutual Funds

If your mutual funds have load fees for redemptions, it is important to be able to know up front how much they are going to cost you. Here is how to include load fees when redeeming mutual funds.

Difficulty: Moderately Easy

Instructions

1. Determine if your mutual fund has load fees for redemption purposes. The industry standard is that Class A shares usually do not have loads for redemptions. Class C shares usually only have load fees for redemptions if they were purchased less than 12 months ago. Class B shares usually have load fees for redemptions unless they were purchased several years ago. The fee schedule for your mutual fund can be found in the prospectus.

2. Find the date you purchased the mutual funds that you are redeeming. Check your statement first and then check your files. End-of-year statements often contain more information than quarterly statements, so check those if necessary. If you cannot find the purchase date, you will need to call the mutual fund company or the company you purchased the mutual funds from to get the date.

3. Determine the amount of the fee by using the chart or table of fees in the prospectus. It is common for mutual funds to have a sliding scale of load fees for redemptions. If this is the case, determine which number applies to your mutual funds. Count how many years you have owned the mutual funds. In can be useful to write it out. So mutual funds purchased on August 1, 2005 are considered First Year redemptions until August 1, 2006, then considered Second Year redemptions until August 1, 2007, and so on.

4. The fee will be applied to the amount redeemed, not the total amount in the account (assuming you are not redeeming the full value of the account). The amount you are redeeming times the amount of the load fee equals the amount of the load you will be charged. For example, if your mutual fund has a 3 percent load fee for redemptions in your year, and you are redeeming $10 thousand, the load fee will be $3 thousand.

5. Subtract the load fee from the amount you are redeeming to determine the amount you will receive. In our example, $10 thousand minus $3 thousand equals $7 thousand received in proceeds.

Tips & Warnings

• If you want to receive a specific amount of money, instruct your broker or mutual fund representative that you want a "net" transaction. That is, you want $10 thousand after fees. They will sell the proper amount to generate $10 thousand in proceeds.
• If you are close to the time of year the mutual funds were purchased, it can be beneficial to wait until after the date of purchase. For example, if the mutual funds were purchased on August 1, and today is June 23, waiting approximately 38 days will result in a lower load fee.