Mutual Fund Exchange Definition

by John Csiszar ; Updated July 27, 2017
Mutual funds can be a good way to invest for your future.

A mutual fund exchange is simply a streamlined way to simultaneously buy and sell mutual funds. Not all mutual funds can be exchanged, and there may be tax consequences to the transaction.

Mutual Funds

A mutual fund is a pool of money from investors that is collectively invested for the benefit of all shareholders.

Mutual Fund Families

The list of all mutual funds offered by one particular investment management company is known as a mutual fund family.

Mutual Fund Exchanges

Mutual funds in the same family can be "exchanged," or swapped. In an exchange, one mutual fund in the fund family is sold while another one is bought.

Exchange Fees

Usually, there are no fees to exchange funds in the same family, as there might be if you purchased a fund outright.

Taxation of Exchanges

Exchanges are taxed as if the funds were bought and sold individually. If you are exchanging out of a fund that has a gain, you will be required to pay capital gains taxes on that exchange.

About the Author

After receiving a Bachelor of Arts in English from UCLA, John Csiszar earned a Certified Financial Planner designation and served 18 years as an investment adviser. Csiszar has served as a technical writer for various financial firms and has extensive experience writing for online publications.

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