Mutual Fund Redemption Question

[sogwap]

Texas

Had custodial mutual fund (think thats what you call it) till today. My son is 16 and we redeemed his Delaware trend a fund. It said that the price today (which is the price we are told we will get) was $14.25 per share. He has 1200 shares. What do that mean when they say today's price? It has gone up and down as do all (don't they?). So what price do they mean -- opening -- closing? It's only a matter of like a few bucks but I'm curious and have NO CLUE**************. Also my FA told me that we wouldn't have to pay taxes because my son is under my care and he is too young to pay. It's his SS #, so I'm not responsible blah blah blah************** I don't know ANYTHING about this, but I have to learn because we want to re-invest. Please don't tell me I made a BIG mistake or I'm a jerk. Details are too too much, it had to be done..... Just need to know whatever anyone can offer. We needed a few bucks but I don't want to blow it all. It's his and he wanted me to, but I want him to have something put away. Hope I make some sense!!!

 

[I_Got_Banned]

Unlike stocks and bonds, whose prices fluctuate -intraday- during the trading session, mutual fund share prices -NAV- do not fluctuate during the day. The price for each share in a mutual fund is calculated at the end of the trading day by adding the funds assets (the value of all undelying investments in that fund), subtracting its liabilities and dividing the result by the number of outstanding shares in that fund.

Since most brokerage firms require you enter a sell order during market hours, and although they can quote you yesterday's price, no one can tell you specifically what the NAV price will be at the end of the day. Since the price will not be calculated until the end of the trading session.

As for your tax question, and since that is not my area, I will leave that for someone else to answer.

 

[sogwap]

Thanks for your response. Appreciated!


So then does that mean that I redeem at the price at the end of the day?

 

[anteater]

The price that you receive will always be an "end of day" price.

But, different mutual fund families have different cutoff times for placing sales orders. That might affect which day that the transaction occurs.

For example, if I want to sell a fund and the fund family has a 2PM cutoff for sales, if I placed the sales order at 8AM today, the sale will occur today and the price I receive will be the NAV at the end of today. If I place the order at 3PM, the sale will not occur until tomorrow the price I receive will be the NAV at the end of the day tomorrow.

Your FA does not have it quite right. The tax liability does not depend upon age. It depends upon the amount of income earned by the minor. And there also is what is known as the "kiddie tax" rule for a minor's investment income that could cause the minor's income to be taxed at the parents' rate.

You can google "kiddie tax" to come up with many articles. One concise one is here:

http://www.fairmark.com/college/kidtax/kiddietax.htm