How to sell a mutual fund (2024)

FAQs

How to sell a mutual fund? ›

Selling mutual fund shares

If you invested through a broker or distributor, you could withdraw money from a Mutual Fund plan through them. Contacting your broker and requesting a withdrawal are options. You must complete and submit a withdrawal request form if you want to withdraw offline.

You can enter an order to buy or sell mutual fund shares at any time, but your trade won't be executed until the closing of the current trading session or the next trading session if you place your order after hours.

When an investor sells mutual fund shares, the redemption process is straightforward, but there might be unexpected charges or fees. Class A shares usually have front-end sales loads, which are fees charged when the investment is made, but Class B shares may impose a charge when shares are sold.

Orders can be placed to either buy or sell and can be made through a brokerage, advisor, or directly through the mutual fund. The shares of mutual funds are very liquid, easily traded, and can be bought or sold on any day the market is open.

If you receive a distribution from a fund that results from the sale of a security the fund held for only six months, that distribution is taxed at your ordinary-income tax rate. If the fund held the security for several years, however, then those funds are subject to the capital gains tax instead.

The mutual fund withdrawal process involves submitting a redemption request through the fund house's online portal or physical form, specifying the number of units or amount to be redeemed, followed by the crediting of funds to the investor's registered bank account.

Cashing out mutual funds from an IRA or other tax-advantaged retirement account could trigger income taxes and penalties, depending on whether it's a traditional or Roth account. Withdrawing money from investments to pay off debt also means missing out on future growth in those accounts.

The funds report distributions to shareholders on IRS Form 1099-DIV after the end of each calendar year. For any time during the year you bought or sold shares in a mutual fund, you must report the transaction on your tax return and pay tax on any gains and dividends.

If you enter a trade to buy or sell shares of a mutual fund, your trade will be executed at the next available net asset value, which is calculated after the market closes and typically posted by 6 p.m. ET. This price may be higher or lower than the previous day's closing NAV.

How do I sell out of a mutual fund? ›

Market Volatility and Risk Management

Assess how the fund fares compared to its category peers and relevant benchmark indices to determine if it consistently lags. If a fund consistently underperforms over multiple periods and fails to deliver satisfactory returns, consider exiting the investment.

How long does it take for a mutual fund trade to settle? The settlement date is the date by which an executed order must be paid, either by cash contribution or delivery of securities. Sells and buys of equity and bond funds settle in one business day.

Most AMCs have a dedicated web portal, mobile application, and relationship manager for their investors. If you have purchased your mutual fund units through an AMC, you can simply log in to the portal/app and select the mutual fund and the units you want to redeem. You can choose to sell some units or all.

The cut-off time for mutual fund off-market orders is 3:00 pm. Can I buy mutual funds after 4pm? No, mutual fund purchases made after 4pm are usually processed on the next business day.

Settlement date may vary by security type and conditions of the trade but is generally two business days for equities and one business day for options and most mutual funds.

An investment in an open end scheme can be redeemed at any time. Unless it is an investment in an Equity Linked Savings Scheme (ELSS), wherein there is a lock-in of 3 years from date of investment, there are no restrictions on investment redemption.

Some equity and bond funds settle on the next business day, while other funds may take up to 3 business days to settle.

Distribution Options: Cash or Reinvest

Earned income or realized capital gains may trigger a fund to pay a distribution. When your fund pays a distribution, you can choose to receive it two ways – in cash or as reinvested units.

The redemption of mutual funds can be done via online or offline methods. In order to redeem funds through offline mode, investors needs to submit a duly signed redemption request form to the AMC's or the Registrar's designated office.