Mutual funds are commonly held by a wide variety of investors. These securities allow individuals to pool their resources to purchase a more diversified portfolio of stocks and bonds than they would otherwise be able to on their own. In addition, mutual funds are managed by professionals who handle all of the trading, record keeping and reporting. However, over time an investor's needs can change. When they do, the need to transfer mutual funds arises.
Examine your current mutual fund holdings. Before making any transfers or other transactions, it is wise to understand exactly which mutual funds are currently held. Pay particular attention to the share classes of each fund holding, as well as the name of the fund company that manages each mutual fund.
Determine any costs or fees associated with transferring mutual funds. Certain mutual funds impose a fee, or load, on any transactions that occur before a specified minimum holding period has been completed. In addition, depending upon where the investments are held, the brokerage firm or mutual fund company may charge a fee or commission for selling or transferring existing holdings.
Decide which mutual funds to transfer money away from, and which mutual funds to transfer money into. There is no end to the various reasons an investor may have to change his portfolio's holdings. Whatever the reason, transferring mutual funds requires identifying a fund to transfer from and a fund to transfer to. A fund transfer is technically a sell and buy operation coupled together. The fund money is being transferred from, is sold. The fund money is being transferred to, is bought.
Determine the specifics of the transfer. Decide whether or not to transfer the entire mutual fund, that is, leave no balance in the fund after the transfer, or to do a partial transfer of the fund. If doing a partial transfer, determine how much of the fund to transfer. Quantities may be denominated in either dollars or shares. For example, you can sell (transfer out) 300 shares or you can sell (transfer out) $3,000.
Enter the transfer order. Whether using an online brokerage platform or speaking personally to a broker, transferring funds requires entering an order to execute the necessary trades. Either complete the online trading form or explain the trade to the broker.
Verify completion of the transfer by reviewing any trade confirmations that are received, as well as checking the balances of both mutual fund positions after the transfer is completed.
- SEC: Introduction to Mutual Funds
- FINRA: Smart Investing Mutual Funds
- SEC: Mutual Fund Fees and Expenses
- Morningstar. "Fact Sheet: The New Morningstar Style Box™ Methodology," Page 1. Accessed Sept. 30, 2019
- Morningstar. "Early Evidence on the Department of Labor Conflict of Interest Rule: New Share Classes Should Reduce Conflicted Advice, Likely Improving Outcomes for Investors," Page 6. Accessed Aug. 3, 2020.
- SEC. "Final Rule: Investment Company Names." Accessed Aug. 3, 2020.
- Fidelity. "Fidelity Magellan Fund." Accessed Aug. 3, 2020.
- Fidelity. "Lessons From an Investing Legend." Accessed Aug. 4, 2020.
- The Washington Post. "Fidelity Manager to Retire." Accessed Aug. 4, 2020.