Mutual Funds/Break Even Sell Price

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Question
QUESTION: Hello:

How is the break even sell price determined for mutual funds?.

For example, if a $100.00 purchase in a mutual fund is purchased at $10.00, and later a $50.00 purchase is made for $5.00 in the same mutual fund, how would the investor know that it is or is not a profitable time to sell all or some of his mutual fund shares at a gain and not a loss?

I thank you for your reply.

ANSWER: Hi. In this example, you would have purchased 20 shares of the mutual fund ($100/$10 + $50/$5)for $150 and therefore your total cost per shares is $7.50. Although this does not determine when a good time to sell is, if you sell for more than $7.50 per share then you will have made money. I hope this helps!

---------- FOLLOW-UP ----------

QUESTION: Hello:

I want to thank you for the reply.

Should the mutual funds annual management fee be taken into consideration when calculating the mutual fund's share price for selling without a loss or would this fee have no effect?

I thank you for your follow-up reply.

Answer
Hi. Its my pleasure to help. To answer your question above, no, the mutual fund expense ratio is not taken into account in determining share price since it is already being reflected. However, trading costs (if any) associated with buying or selling the mutual fund do have an impact on your cost basis for gains/loss purposes. I hope this helps

Mutual Funds

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John D Smith, CFP

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I can answer detailed questions regarding mutual fund investing, retirement planning, education planning and related comprehensive wealth management and investment concerns.

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