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. Investing

    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. Financial Advisor

    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.
  3. Investing

    How to Choose Between Mutual Funds and ETFs

    Mutual funds and ETFs are both investment funds, but they are not as similar as you might think.
  4. Investing

    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.
  5. Investing

    The Advantages Of Mutual Funds

    Learn how to get diversification, liquidity and professional management at an affordable price.
  6. Financial Advisor

    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.
  7. Investing

    When To Sell A Mutual Fund

    Unhappy with your mutual fund's returns and thinking of investing elsewhere? Read this article first.
  8. Financial Advisor

    An Introduction To Mutual Funds

    Mutual funds are the starting point for many individual investors because they offer a balanced portfolio in a single investment. Find out how mutual funds work and whether they are the investment ...
Frequently Asked Questions
  1. What is the difference between secured and unsecured debts?

    The differences between secured and unsecured debt, and how banks buffer risks associated with each type of loan through ...
  2. How Many Times has Warren Buffett Been Married?

    Warren Buffett has been married twice in his life, but the circumstances surrounding the marriages were unconventional.
  3. What's the smallest number of shares of stock that I can buy?

    Many people would say the smallest number of shares an investor can purchase is one, but the real answer is not as straightforward. ...
  4. What is an economic moat?

    An economic moat refers to a company's ability to maintain competitive advantages to protect its long-term profits and market ...
Trading Center