Mutual-Funds-Advisor.com » Strategies for Mutual Fund Investing » Redemption of Shares

Redemption of Shares

One of the major characteristics of mutual funds is their high liquidity. This means that whenever you feel the need of selling your shares of the mutual fund you hold, you can easily do it. This redemption will be executed on the day the fund is open. The mutual fund will buy the shares form you and the proceeds form the sell will be readily available to you. The redemption will be executed in the current NAV (Net Asset Value) of the shares you sell.

Check Writing Privileges

The opportunity of writing checks that are covered by the money you hold in your fund account is offered by many money market mutual funds and other fixed-income funds. The money you withdraw from your account in the form of a check can be deposited in your bank account. Other uses of checking from your mutual fund account include the coverage of an installment of mortgage or the paying of bills. However, you continue to earn dividends on the mutual fund you possess. This continues until you withdraw all the money you have in your mutual fund. Some mutual fund companies that provide this service impose limits on the number of checks that can be written against the account. Additionally, limitations on the minimum check amount may be implemented at the discretion of the mutual fund.

Telephone Exchange Privileges

Telephone exchange privileges represent the option of calling your mutual fund company and asking for the redemption of shares from your stock fund. The proceeds are then transferred to your money market fund account, form where you can use them for whatsoever purposes you consider appropriate. In such a way you gain access to the money you have accumulated in your stock fund.

Wire Redemption

By using the bank wire-transfer system, money from the redemption of shares can be transferred to your checking account. For the purposes of security, some mutual funds require the redemption application to be in written form accompanied by a signature guarantee that is available by every commercial bank.

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