BUYING AND REDEEMING MUTUAL FUNDS

You can buy mutual fund shares directly from a mutual fund company or from a securities broker. Either way, buying and redeeming are relatively easy.

To buy shares directly from a mutual fund, you send money to the fund. Redeeming shares works the same way. In all cases, the customer (you) executes all transactions with the mutual fund company. Many funds also allow you to redeem shares over the telephone. You can also set up an automatic investment plan to do your work for you. Under this plan, you can have a fixed amount of money withdrawn monthly from your bank account and sent to the fund. Using this option requires that you first authorize it on your application form. Most mutual funds allow it. Many funds require initial investments over $1,000. However, many of them waive this requirement if you agree to an automatic investment plan that withdraws from your bank account until you reach the required minimum.

Buying shares from a broker works much the same way. The primary difference is that the broker saves you the work of executing your own orders, since in this arrangement it is his or her responsibility to execute all transactions with the mutual fund company. The majority of mutual funds purchased from brokerage firms also allow the customer to benefit from the ability to easily redeem shares or participate in automatic investment plans. For specific details on how your brokerage fund handles the processes of buying and redeeming mutual fund shares, be sure to ask your broker.

Of course, there are some costs involved in buying and selling mutual fund shares. On the next screen, we will explain the most common expenses.