Trade Plus Three
When you purchase a mutual fund you can make your order prior to actually paying for the shares. You must pay for your share purchase within three business days of the purchase. If you fail to pay the broker that bought the shares on your behalf then the broker can retain the shares or sell them but you have no claims on the shares or the proceeds. The Securities and Exchange Commission does not require brokers and mutual funds to abide by the "Trade Plus Three" rule for fund sales but typically most firms disburse the money within a few days.
Placing a Sale
Mutual fund sales occur after the New York Stock Exchange closes for business. Since funds are composed of thousands of stocks and bonds, the fund manager waits until the end of the day and uses the closing prices of the underlying securities to determine the value of the fund as a whole. Having established the fund value, fund managers determine the share price by dividing the total value by the number of shares issued by the fund. You receive the share price as of the day you place your trade and due to the pricing process you have no way of knowing the sale price beforehand.
The NYSE closes at 4 p.m. Eastern Standard Time and you must place your trade requests prior to that time. Some brokers require shareholders to place trade requests at least an hour before the market closes. Your orders are placed after the close of business the following day if you miss the cutoff time. If you miss a Friday cutoff time, your sale cannot occur until after the close of business Monday, which means you may not receive the proceeds until almost one week after you actually placed the trade request.
When you hold mutual fund shares inside a brokerage account, the broker deposits the sale proceeds into the brokerage holding account and if you have a checkbook linked to that account you can access funds without delay. If you own shares in the fund directly you can either pay to have the fund proceeds wired to you or wait for the fund company to mail you a check. Wires occur same day, whereas most companies tell shareholders to allow seven days for proceeds sent in the mail to arrive.