How Long Does It Take to Sell Mutual Funds?

Understanding the Mutual Fund Selling Process

Selling mutual funds involves a structured process that begins when an investor initiates a redemption request. Unlike individual stocks or exchange-traded funds (ETFs) that trade continuously, mutual fund orders are processed once daily. This daily pricing occurs after major U.S. stock exchanges close, usually around 4:00 p.m. Eastern Time.

The price an investor receives is based on the fund’s Net Asset Value (NAV) per share. NAV is calculated by taking the fund’s assets, subtracting liabilities, and dividing by outstanding shares. Requests received before the daily cut-off time are processed at that day’s NAV; requests after the cut-off are processed at the next business day’s NAV.

After the trade executes at the determined NAV, the transaction enters a “settlement period.” This period is the time it takes for share ownership to transfer and cash to be prepared for distribution. For most mutual funds, the standard settlement period is “T+2,” meaning the transaction settles two business days after the trade date (“T”). For instance, an order placed on Monday (T) would typically settle by Wednesday, assuming no market holidays.

Factors Influencing Redemption Time

Several elements can extend the time for mutual fund redemptions to process and funds to become accessible. A fund’s liquidity plays a role; funds investing in less liquid assets, like certain bond or real estate funds, might have longer settlement periods or redemption gates. While most liquid mutual funds adhere to T+2 settlement, it is important to review the fund’s specific details.

The fund company’s or brokerage’s internal processing times and daily cut-off times also influence when a redemption is priced. Missing a firm’s cut-off, which can be earlier than market close, means the order is treated as placed on the next business day, delaying the trade date and settlement. The method used to submit the request also adds processing time; online requests are fastest, while phone calls and mail-in requests introduce delays.

Market holidays and weekends are not business days and therefore extend the settlement period. For example, a T+2 trade on a Friday would not settle until the following Tuesday. Regulatory requirements, such as anti-money laundering (AML) checks, can cause delays, particularly for larger redemption amounts or unusual account activity. These checks ensure compliance but may require additional time for verification.

Receiving Your Funds

Once the mutual fund sale settles, proceeds are ready for transfer to the investor. The most common method is an Automated Clearing House (ACH) transfer, which electronically moves money into a linked bank account. ACH transfers typically take one to three business days to appear in the receiving account after the sale settles. For instance, if a T+2 sale settles on a Wednesday, funds might not be available until Friday or the following Monday.

Another option is a wire transfer, offering a faster, though often more expensive, method. Wire transfers can be completed the same or next business day after the sale settles, depending on the brokerage firm’s processing times and the receiving bank’s policies. Fees for wire transfers typically range from $15 to $30 or more per transaction. Physical checks can also be requested, but these add several days to a week or more due to mailing time.

Investors typically receive a confirmation from their brokerage or fund company once the redemption is complete and funds are dispatched. Selling mutual funds is a taxable event. Any gains realized from the sale are subject to capital gains tax, which should be reported on the investor’s tax return.