Buying and selling MFs

Buying and selling MFs

Mutual funds are investment vehicles that pool money from a group of investors to purchase a portfolio of securities. The portfolio may include stocks, bonds, or other types of assets, depending on the investment objectives of the mutual fund. When investing in mutual funds, investors can either buy or sell shares of the fund. Buying shares of a mutual fund allows investors to participate in the fund’s portfolio returns and receive a portion of the income generated by the underlying assets.

When buying mutual fund shares, investors can choose between various types of funds, such as equity funds, bond funds, or balanced funds. They can also select different investment strategies, such as actively managed funds or passively managed index funds. The mutual fund shares are priced at their net asset value (NAV), which is calculated by dividing the total value of the fund’s assets by the number of outstanding shares.

Selling mutual fund shares allows investors to exit their position in the fund and receive the current market value of their shares. However, it is important to note that selling mutual fund shares may result in capital gains or losses, depending on the price at which the shares were purchased and sold. Investors can sell their mutual fund shares either directly back to the fund or on a secondary market. The price at which the shares are sold on the secondary market may differ from the NAV of the fund due to market fluctuations and transaction costs.

Similar to other securities, mutual funds must also be sold through dealers who are registered with the securities regulator in the region. Most financial institutions – such as banks, brokerages and trust companies – also have subsidiaries that are registered to sell mutual funds.

One can purchase shares in some mutual funds by contacting the fund directly, but they are mostly sold through brokers, banks, financial planners, or insurance agents. All mutual fund shares can be redeemed on any business day and must the payment must reach the client within seven days.

When shares are being bought, one pays the current NAV per share plus any fee the fund assesses at the time of purchase, such as a purchase sales load or other type of purchase fee.

When the shares are being sold, the amount paid to the investor is the NAV minus any fee the fund assesses at the time of redemption, such as a deferred sales load or redemption fee. A fund’s NAV goes up or down daily as its holdings change in value.