Q&A: Selling mutual funds

Question: I have always had a difficult time with decisions to
sell mutual funds. I am never quite clear on what sales charges, if any, I will
incur. I try to look through the prospectus and sometimes I try to find out through
my bank as well, but even when they think they know, the fee can end up being
quite different. Is there an easy way to determine sales charges on your mutual
funds (before selling)? – K.M.

Gordon Pape answers: Not really, unless you go about purchasing
them in the right way. There are two types of charges you may incur. One is
a deferred sales charge (DSC). It is levied by the fund company in cases where
a fund has been purchased using that sales option and then is sold within a
certain time frame (typically six years). The charge decreases on a sliding
scale the longer you own the units. Your broker or fund dealer may also charge
a fee for putting through the transaction.

The best way to avoid these problems in the future is to stick with no-load
funds or buy commission funds on a front-end load basis with a 0 per cent fee.
In either case, when you sell there will be no cost. Many brokers offer this
choice including some discounters such as E*Trade Canada.

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