This forces investors who bought when the fund was more expensive to sell at a loss.
Worse yet, the fund may have embedded capital gains, which can have an immediate impact for investors holding the fund in a taxable account.
Mutual funds are popular with young couples because they offer diversified portfolios run by professional investors with a minimal initial investment.
While mutual funds are designed for long-term investment, there may come a time when you want to pick your own investments, switch to a better fund or simply withdraw the money for unexpected expenses.
Whenever you sell shares in a mutual fund, you'll generate a capital gain or loss that must be reported to the Internal Revenue Service.
Even if you move money from one fund into another in what seems like a single, seamless transaction, a taxable event still has occurred.
For mutual fund shares purchased prior to 2012, the article below still serves as a guide to selecting the appropriate, historic cost basis method.The objective of a liquidating trust is to help expedite the liquidation of the entity, and allow the owners to recognize gain or loss and to receive proceeds in an orderly manner.In addition, it may be prudent for the fund manager to set aside certain cash reserves before making final distributions to the fund owners.More recently, no-load funds have proliferated in the marketplace, charging investors no commission at all on both purchases and sales.If you purchased a type of share class known as a B share, you may have to pay a sales charge if you liquidate your mutual fund.