Withdrawing funds from a professional money management account

Question

I would like to invest some cash from my saving account into a professional money management account, for example, Fidelity Go being a robo advisor so that somebody else (not me) takes care of all investments.
The account primarily holds a combination of mutual funds (domestic stocks, foreign stocks, bonds, or short-term investments). Once you login online, you can see a cash equivalent of your funds, say, $100.
Now, imagine, I want to withdraw all cash from the account and close it. Assuming there are no maintenance fees, will I get these $100 in cash as stated? Will there be some conversion from the mutual funds into cash, so that I end up with more/less money on hands than the $100. Is it possible to get a drastically different amount (say, 10 times more/less) than the $100 as stated at the time the withdrawal request has been made?

yoozer8 · Accepted Answer

You indeed may end up with more or less than $100. Since you use the phrase see a cash equivalent of your funds, I assume you understand that it is not actually cash that you have in this account; instead you own shares of a fund (or funds) in the account. In order to withdraw cash from the account, you need to sell these fund shares for cash, and then withdraw that cash. There are a couple considerations here:

Transaction fees: there may be fees to sell your shares. You should be able to determine ahead of time what fees if any will apply, and how much this will cost. Recently most brokers have minimized or eliminated such fees in general. However, some funds charge fees themselves, and some brokers charge fees for some funds.
Mutual fund trading: unlike stocks, which can be bought and sold at any price throughout the day (assuming there is someone on the other side of the transaction who agrees to the price), mutual funds typically transact after the close of business for the day. While an individual stock (or an ETF, which in over-simplified terms is a mutual fund that trades like stock) will have myriad instantaneous prices throughout the day, a mutual fund will have a single daily price calculated (based on the holdings of the fund) once trading closes for the day. This may be higher or lower than what you saw during the day when you decided to sell. The likelihood that it will be a factor of 10 as mentioned in your question in vanishingly small; changes on any random day are most likely to be in the ballpark a few percent or less in either direction.
Taxes: if you are selling the shares at a higher price than you purchased them, then you have a taxable capital gain. Depending on how long you've held the shares, this could be short-term (less than one year) and taxed as ordinary income, or long-term (more than one year) and taxed more favorably. Your broker may not withhold any taxes at the time of sale/withdrawal, but you will be obligated to pay these taxes.

So yes, you will almost certainly get approximately $100.

Withdrawing funds from a professional money management account

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