How to Sell Mutual Funds

Mutual funds provide a great investment option for many people. However, sooner or later, whether to take profits, shift investment strategy or to cut the losers, an investor will need to sell mutual funds. When that time comes, understanding some basics will make the process smoother.

Difficulty: Moderate

Instructions

1. Decide if you want to sell via dollars, shares, or selling the whole position. If you are selling by dollars, decide whether you want to sell via "net" or "gross." Selling by "net" means that you will sell enough shares to deliver a specific amount of money to you, which may require selling a higher amount in order to deduct any fees or charges and still deliver the amount requested. If selling by gross, then enough will be sold to generate the desired amount. Any fees or charges will result in less money being received by the seller.

2. Contact your broker or your mutual fund company. Generally, you will contact the same institution that you bought your mutual fund shares through, although most mutual fund companies will take orders from shareholders regardless of how the shares were bought. However, a broker will not be able to sell shares that you do not have in an account at their firm. If your account has been set up for online trading, you can use that method to contact the company as well.

3. Instruct the company to place your order. There is no need to use complicated jargon when selling mutual funds. If selling a partial position, it will be necessary to be specific about whether you are instructing a net sale or a gross sale. You do not have to use those terms. You can simply say, "I want to sell enough to get a check for $10,000," which instructs the representative to place a net sale. Or you can say, "I want to sell $10,000 worth and you can deduct any fees from that amount." which instructs a gross sale. If you are selling a whole position, simply instruct the representative to sell "all" of your fund. If you are selling via online trading, you will need to select the appropriate option to instruct a sale by dollars or by shares. If there is no option to sell "all" then you will need to manually enter the number of shares in your account to sell all.

4. Listen to the disclosures. Many fund companies place restrictions on trading in their funds in order to avoid market timers. If that is the case, the representative will inform you of those restrictions. For example, some companies won't allow you to repurchase shares in that mutual fund for 30 days. The representative should also inform you of any fees or charges that you will be paying for your transaction.

5. Choose how to receive funds. If you have a brokerage account and want the money to be deposited there, you won't need to do anything. Otherwise, you may have to chose between having a check mailed to the address of record (the address they have on file for you) or some institutions may offer direct deposit to an account if that feature has been set up. Wire transfers are possible, but are falling out of favor. Expect a fee for a wire transfer unless you have a large account with the institution, in which case the fee may be waived.

Tips & Warnings

• When choosing to have a check mailed to you, the institution will only send it to the address they have on file. To combat fraud, you cannot change your address at the time you make a sale (usually you must wait 7 to 10 business days). So, make sure to keep your address updated.
• When selling by dollars, keep in mind that mutual funds are only priced once per day at the close of business. In order to sell on Wednesday, for example, a sell has to be entered before the close of the market on Wednesday. However, the price of the shares for Wednesday will not be set until AFTER the market has closed. So, you and the company are often making an estimate as to how many shares to sell so you may have a small variance in the amount of the sale.