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Can You Pull Your Money Out of a Mutual Fund?

Mutual funds pool funds from numerous people and invest it in a group of stocks, bonds, or other investments to create a portfolio. A mutual fund focuses on a certain type of stock, part of the world, business sector, or stock market index such as the S&P 500 or the Dow Jones industrial average. The terms of any redemptions or withdrawals you can take are dictated by the type of account you have and who you opened it with or transferred it to. 

A mutual fund essentially works like this: you choose a fund to invest in (such as international, technology, value, etc.), buy fund shares, and let a money manager identify the specific stocks he or she believes will yield the greatest return. You pay an annual fee in exchange for this diversification and your money manager’s expertise.

As much as the fund, you are really investing in the skill and insight of your fund manager. By placing your money in his or her fund, you are betting that he or she will turn a profit.

The experienced mutual fund fraud lawyers at Colling Gilbert Wright & Carter understand the risks of mutual fund investments, especially when mutual fund managers are not working in the best interests of their clients. We have helped victims of mutual fund fraud throughout Orlando achieve the justice and compensation they deserve for their losses.

How to Withdraw Money From a Mutual Fund

In order to pull money from a mutual fund, you need to call the issuer of the account, request to sell a portion of your shares, and explain how you want to happen with the proceeds. Then you need to report any gains to the IRS and pay the associated tax. This is explained further below.

Contact the Account Issuer

Get in touch with the firm with whom you hold your mutual fund. While this may be the same company whose name is attached to the fund, such as Vanguard or Fidelity, you may also hold a mutual fund from a company with another firm, brokerage, bank, or other financial institution. Your quarterly or monthly statement will have the contact information for the firm with whom you own your account.

Request to Sell

Inform the issuer of the account that you wish to sell part of your shares in the mutual fund. You can also perform this step on the websites of most firms if you have set up access via an online account. You may even be able to redeem your share over the phone if you have an automated telephone system featured on your account.

Regardless of the method, you can choose a specific number of shares you would like to sell or assign a dollar amount that you would like to receive from the transaction. The U.S. Securities and Exchange Commission has limited the redemption fee a fund can charge to two percent.

Direct the Proceeds

Instruct the firm with whom you hold your mutual fund on what to do with the proceeds. You can have the proceeds from your sold shares sent to you via electronic bank transfer or check. If you have a check card or check writing privileges, you can access the balance in the money market. If you hold a brokerage account, you can ask for the money to be kept in a money market reserve fund.

Report Gains to the IRS

When you sell a mutual fund share, you will have incurred a capital loss or capital gain. If you sell the shares for less than you paid for them, you will usually incur a capital loss. The inverse is true for a capital gain. Capital gains must be reported to the IRS at tax time.

By saving your mutual fund statements, you can accurately record your capital losses or gains, sales price, and average cost basis for IRS reporting purposes. You can also redeem mutual fund shares in an IRA the same way as described in this article. However, if proceeds are taken out of your IRA as a distribution, they may be subject to taxes levied by the IRS.

Identifying Mutual Fund Fraud

Mutual fund fraud can be difficult to identify because many people who invest in mutual funds do not pay close attention to their investments. In fact, for many, that’s the point of a mutual fund. Unfortunately, this makes it hard to notice mutual fund fraud before it is too late.

Monitor your investments closely and keep an eye out for some of the following signs of mutual fund fraud:

  • Recommendations to unusually concentrated investments
  • Unauthorized changes to your fund
  • Your broker suddenly becoming recalcitrant and reluctant to talk
  • Dramatic, unexplained swings in your fund’s value

Investors are often reluctant to get too deep into the weeds of their mutual funds. Instead, they simply rely on their financial advisors to do the right thing. In order to best protect your investments, you should be pro-actively involved in them. Doing so can safeguard the value of your mutual fund investments.

Contact a Mutual Fund Fraud Attorney in Orlando

If you’ve been a victim of mutual fund fraud, contact the experienced mutual fund fraud attorneys at Colling Gilbert Wright & Carter today at (407) 712-7300 for a free case evaluation. We serve clients in Orlando, Florida and nationwide.