Buying and Redeeming Mutual Funds
Mutual fund shares are a continuous public offering as defined by the SEC. All sales must be accompanied by a prospectus. Because of the continuous offering nature of mutual fund shares, a rule called Regulation T prohibits the purchase of mutual fund shares on margin. This is an important point to remember when your clients ask to buy mutual fund shares on loan in a margin account. It can't happen!

An investor can redeem fractions or whole shares of his or her mutual fund by selling them at the NAV. When will the redemption price be determined? At the same time that the fund company computes the daily NAV, at the close of business of the NYSE or as stated in the prospectus.

Mutual fund companies must pay the proceeds of the redemption amount to the investor within seven calendar days.

Look Out!
You will need to know the time within which an investment company has to forward the proceeds of the mutual fund redemption to the investor. Do not confuse this time period with stock or bond settlement, and remember: CALENDAR days, not business days like other securities!



Important Factors in the Comparison of Funds

Related Articles
  1. ETFs & Mutual Funds

    A Guide to Mutual Funds Trading Rules

    Make sure to review this guide on the dos and don'ts of mutual fund trading before you invest, including how trades are executed and which fees to look out for.
  2. ETFs & Mutual Funds

    A Mutual Funds Guide for Young Investors

    Learn how mutual funds work, why they are so popular and how younger investors can get started by putting mutual funds in their IRAs or 401(k)s.
  3. ETFs & Mutual Funds

    Trading Mutual Funds For Beginners

    Learn about the basics of trading and investing in mutual funds. Understand how the fees charged by mutual funds can impact the performance of an investment.
  4. Investing

    Advising FAs: Explaining Mutual Funds to a Client

    More than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
  5. ETFs & Mutual Funds

    4 Mistakes to Avoid When Choosing Mutual Funds to Invest in

    Mutual funds are a great way to build wealth but not all of them are the same. Investors have to be mindful of fees, turnover, redundancy and performance.
  6. ETFs & Mutual Funds

    Selling Mutual Funds: What Happens When You Liquidate?

    Learn about the hidden costs that can be triggered when you redeem mutual fund shares. Even no-load funds have fees and expenses you may not know about.
  7. ETFs & Mutual Funds

    5 Secrets You Didn’t Know About Mutual Funds

    Learn five of the "secrets" about mutual funds that can have a significant impact on mutual fund choices and investor profitability.
  8. ETFs & Mutual Funds

    How liquid are Fidelity mutual funds?

    Review the liquidity features of mutual fund shares and an overview of Fidelity mutual funds. Most investors look for convenient access to their investments.
  9. Managing Wealth

    Mutual Funds: What Are They?

    The Definition A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a mutual fund as a company that brings together a group of people and invests their money ...
  10. Managing Wealth

    Mutual Funds: Introduction

    As you probably know, mutual funds have become extremely popular over the last 20 years. What was once just another obscure financial instrument is now a part of our daily lives. More than 8 ...
Trading Center