Diversified investments, such as mutual funds and exchange-traded funds (ETFs) normally contain different types of securities, including cash equivalents, stocks and bonds. When you cash in shares in a mutual fund, the fund company actually redeems your investment. ETFs work similarly to mutual funds, except that you sell shares to another investor rather than redeem them with the fund company. As the name suggests, diversified investments can help diversify your portfolio because they invest across multiple asset types. Despite the appeal of these securities, a situation can arise in which your short-term needs force you to cash in the account
1. Contact your investment broker and him to sell or cash in your diversified investment. The broker will verify your identity by asking for personal information such as your Social Security number and date of birth. Answer the brokers questions as needed.
2. Ask the broker if you will have to pay any fees when you cash in your account. If you own B or C class mutual fund shares you normally have to pay a commission known as a back-end load when you redeem shares. Your broker can also assess a trade fee when you sell other types of securities such as ETFs.
3. Confirm that you want to proceed with the trade or redemption once your broker has reviewed the account and provided you with the current balance. Your broker can provide you with a confirmation number or a receipt. ETF trades occur instantaneously, but mutual fund trades occur after the market closes, in which case you should check your account balance the following day.
4. Tell your broker how you want the funds disbursed. You can request an electronic transfer to send the money to your bank account, in which case you must provide the broker with an account and routing number. Alternatively, you can ask the broker to provide you with a disbursement check that you can deposit or cash at your bank.
- Many investment firms require you to maintain a minimum balance or hold a certain number of shares in your account. Therefore, you should close your account if your plan to cash in your investment and leave little or no money in the account for a period of time.
- If you cash in a diversified investment within a retirement account, you have to pay income tax on any of the account proceeds that have not been previously taxed. You also have to pay a 10 percent penalty if you do not make a qualified withdrawal. Your withdrawal meets the Internal Revenue Service's definition of qualified if you are over 59 1/2, or if you become disabled. Depending on the account type you can make a qualified withdrawal in certain other circumstances, such as when you need funds to buy a home for the first time.
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