Exchange Privilege

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DEFINITION of 'Exchange Privilege'

The opportunity given to mutual fund shareholders to exchange their investment in a fund for another within the same fund family at no additional cost. This privilege allows investors to switch funds when market conditions change.

BREAKING DOWN 'Exchange Privilege'

For example, you might want to be in an aggressive growth fund when the market is going up, but when the markets start heading downward, you may switch to a bond fund.

There is usually a limit to how many times an investor can switch funds within a year.

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RELATED FAQS
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    Distribution of dividends reduces the net asset value (NAV) of mutual fund shares. However, this doesn't mean that fund investors ... Read Full Answer >>
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    Unlike a 401(k) or Individual Retirement Account (IRA), mutual funds are not classified as retirement accounts. Employers ... Read Full Answer >>
  3. Do mutual funds invest only in stocks?

    Mutual funds invest in stocks, but certain types also invest in government and corporate bonds. Stocks are subject to the ... Read Full Answer >>
  4. Why are mutual funds not FDIC-insured?

    Mutual funds are not Federal Deposit Insurance Corporation (FDIC)-insured because money invested in funds are not considered ... Read Full Answer >>
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    Mutual funds can invest in commodities. In fact, mutual funds may provide a better way for investors to gain exposure to ... Read Full Answer >>
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