Introduction to mutual fund trading

Introduction to mutual fund trading

Use the Web Trading platform to place mutual fund trade orders. Contact the Mutual Fund Trading Desk at 800-367-5198 option 2 with any questions.

Trade Types

The Web Trading platform allows you to streamline your workflow and execute trades efficiently. Functionality for trading mutual funds through the Web Trading platform provides access and the ability to:

  • View into single:
    • Order Entry
    • Order Edit
    • Order Submit
    • Order Blotter
  • Trade advisor-only funds
  • Sell dollars, sell %, and swap %
  • Create linked orders
  • Create an order by master account (OBMA)
  • Create an order by client account (OBCA)
  • Add new money (up to $99,999.99) to the buy side of swap or buy orders in a linked order (Not available for an inter-class exchange)

User preferences applicable for:

  • Master account
  • Security type
  • Informational-only edit suppression

Same session information retained in the order mask from the previously entered order.

Trading Methods

Online – through the Web Trading platform.

Phone – Certain orders are not eligible for online trading and require transmission over the phone Tooltip .
Fax – Not accepted
Mail – Not accepted

Sending trading instructions via fax or mail may result in significant delays before order placement.

Cutoff Times

It is your responsibility to allow ample time for the placement of all your orders. Orders received after the cutoff time will not be eligible for same-day execution.

  • Most mutual fund trades Tooltip entered electronically – 4:00 p.m. ET
  • Some Profunds – 3:00 p.m., 3:30 p.m., or 3:50 p.m. ET

There may be additional funds with early cutoff times. Refer to the Research tab Facts & Fees area for specific cutoff times or contact the Mutual Fund Trading Desk Tooltip .

Under no circumstances may mutual fund trades be changed or canceled after market close Tooltip .

SettlementNext business day settlement for buy and sell trades received before 4:00 p.m. ET. Other applicable cutoff times may apply.

Settlement information can vary by fund. Refer to the Research page on Schwab Advisor Center for details.
Margin RequirementsMost mutual fund orders settle on the next business day. It is your responsibility to ensure funds are available to cover Tooltip purchases in client accounts. Trades placed in a margin account with no cash balance use margin cash available Tooltip and/or buying power.

Refer to Introduction to margin for more information.
Trading Discretion

Enter these trades on the Web Trading platform or contact the Mutual Fund Trading Desk Tooltip by phone.

For accounts where your firm does not maintain trading discretion:

Holding PeriodsHolding period requirements vary by mutual fund. It is your responsibility to monitor these requirements. For fund-specific information on contingent redemption fees, refer to the Fund Facts & Fees on the Schwab Research tab, the prospectus, or contact the fund company directly.

Schwab is not responsible for notifying you about contingent redemption fees imposed by the fund company.
Trade Review

You are responsible for reviewing all trades for accuracy Tooltip and accessing the Order Status link under the Trading tab, or the Upload Activity Log to verify Schwab's receipt of a file.

  • When Schwab receives your orders, they review for compliance with Schwab's mutual fund trading policies.
  • In the event of a discrepancy, conditions permitting, we will attempt to contact you.

If we are unable to reach you, we will use reasonable efforts to place those trades that require no additional research or action by you. Schwab is not responsible for processing corrections or changes to orders received after the stated mutual fund cutoff time(s).

Prospectus

Fund-specific information, including information on contingent redemption fees, sales loads, and other fund-based fees. Read carefully before investing.

  • Access online through the research tab of Schwab Advisor Center.
  • Submit request online to have a copy mailed.
International Legal Address

Effective April 30, 2020, customers must reside within the United States (defined by legal address) which includes Puerto Rico, the U.S. Virgin Islands, and other U.S. territories (except Guam) to remain eligible for 1940 Act mutual funds (including position-traded money funds) and inter-class exchange.

Exceptions to this include:

  • Clients serving in the military and/or residing on a military base outside the United States, as well as, in the military and residing on a military base in a foreign country; APO/DPO/FPO address is required.
  • U.S.-governed trust accounts whereby the trust was established in the U.S.
  • Employer-sponsored retirement plans, such as 401(k) and 403(b) plans (individual retirement accounts such as Traditional and Roth IRAs are subject to new trading restrictions).
  • Corporate accounts whereby the entity was established in the U.S.

Information regarding the types of trades Tooltip available and other factors affecting mutual fund trading.

Linked ordersTransaction applying the proceeds of a sell or group of sell orders Tooltip , on settlement date, to purchase fund(s) in the percentages you specify.
Swap ordersTransaction applying the entire proceeds of one sell to one purchase, less any fees.
Same-day substitutionsOccurs when selling a mutual fund and buying a different fund on the same day, using the sell proceeds to cover Tooltip the cost.
Inter-class exchange

A nontaxable exchange between approved share classes of the same fund (e.g., retail to institutional Tooltip ).

The following conditions apply:

  • Initial minimums apply
  • Normal transaction fees apply on fee-based mutual funds

Available only by pre-arrangement for selected funds and subject to special rules. Contact the Schwab Mutual Fund Trading Desk Tooltip for more information.

Automatic Investment Plan (AIP)

Allows clients of Schwab Advisor Services® to automatically make periodic investments and redemptions for eligible funds available through the Mutual Fund Marketplace®.

See Introduction to Automatic Investment Plan (AIP) for Mutual Funds for additional information.

Front-end load fundsAs of May 2, 2016, front-end load funds are no longer available for initial or subsequent purchase.
Interval funds

Interval funds are closed-end funds that typically offer daily purchases, depending on the asset manager, and redemption of shares through periodic repurchase offerings for a certain portion of shares.

They can create portfolios with less capital volatility while holding a greater percentage of less-liquid, longer-term investments, often with a higher risk-return opportunities that may be readily achieved in open-ended funds or ETFs.

  • Purchases – Typically execute any business day, however can vary by asset manager and/or be subject to restrictions.
  • Liquidity
    • May own illiquid investments that ordinary mutual funds cannot.
    • Offer limited redemption windows, either on a monthly, or more typically, a quarterly basis.
    • May limit redemption amounts to as little as 5% of the fund's underlying assets at any given repurchase date.
  • Redemption dates – The fund will specify a date by which shareholders must accept the repurchase offer; this repurchase date should be verified with the asset manager.
  • Proration – If repurchase requests exceed the number of shares offered, they will be prorated, potentially exposing shareholders to increased illiquidity and market exposure, which could increase the potential for investment loss.
B shares

B shares forgo revenue obtained from an up-front load, and instead charge higher 12b-1 fees and charge a back-end load to discourage early redemption.

  • Funds are custody and redemptions only; no purchases permitted.
  • Transfers into Schwab accounts allowed.
  • Sales permitted once position is in the possession of Schwab.
  • Dividends/capital gains reinvestment allowed.
  • No Schwab transaction fees charged.
  • Sell settlement is typically three business days.
  • Cutoff time is market close.
  • CDSC fees subtracted from the proceeds of the sell.
  • Exchanges not allowed.
  • Funds price daily.

Contact the Transfer of Accounts team at 877-552-8211 with questions.

Offshore mutual fundsSchwab currently offers mutual funds from several offshore fund families available only to non-U.S. persons Tooltip . To receive information on offshore funds, you must be a registered investment advisor (RIA) under the Investment Advisers Act of 1940.

Because offshore funds are not registered for sale in the U.S., an offering of offshore funds may not be made within the U.S., including the mailing or distribution of offshore fund materials to eligible clients while they are physically present in the U.S. Refer to the Research page on Schwab Advisor Center® to analyze and compare offshore funds.

Prior to order placement, it is your responsibility to directly notify the fund company of large orders Tooltip to provide additional information Tooltip required by the fund company. Schwab is not responsible for orders rejected by the fund company. 

Schwab strongly encourages you to place large orders at least two hours prior to market close or the applicable fund cutoff time. The mutual fund company makes the final decision to accept or reject an order.

 

Potential consequences and restrictions of large or frequent orders

Buying
  • If a fund company rejects your large order, you may not have time to choose an alternative the same day.
  • Any sales linked to your purchase may still execute.
Selling
  • As specified in the fund's prospectus, fund companies may extend the settlement date. If this occurs, the trade date of any linked purchase can also alter.
  • Fund companies may choose to redeem in kind Tooltip , particularly for individual sell orders of $250,000 or more.
  • At its discretion, a fund company may choose to restrict Tooltip purchase privileges.

 

To place a large order for a SchwabFund Equity Index Fund, notify the Schwab Mutual Fund Trading Desk Tooltip as early in the day as possible. Early notification helps improve Schwab's ability to track indexes closely and trade efficiently. This is particularly important for aggregated and/or individual orders for SchwabFund Equity Index Funds exceeding $500,000.

Under what circumstances might settlement dates be extended?
A fund company reserves the right to extend sell settlements without prior notice according to the company's discretion. Refer to the Research page on Schwab Advisor Center for details of extended settlements on mutual funds. Schwab makes reasonable efforts to update this information in a timely manner. However, Schwab cannot guarantee that this information is complete in all cases.

What is Schwab's short-term redemption policy?
Schwab's short-term redemption fee policy was retired for funds on the Advisor Services platform as of February 23, 2024.

Does the "Specify Share Lot" cost basis option have a bearing on the aging of shares where an STR, CRF, or CDSC is concerned?
STRs, CRFs, and CDSCs are always aged via FIFO – no exceptions. These fees cannot be reassigned to different tax lots via the specify share lot function.

When can cost basis lots be updated?
Per IRS and Schwab requirements:

  • Lot instructions can be entered at time of trade or updated on settlement.
  • After trade is placed, lot instructions can be updated on Schwab Advisor Center via the Order Status tab until 11:59:59 p.m. ET on settlement day.

What is the official definition of Schwab's Mutual Fund OneSource offering?
The Mutual Fund OneSource service is the foundation of Schwab's mutual fund offering. Of the thousands of mutual funds available through Schwab's Mutual Fund Marketplace®, the Mutual Fund OneSource service allows clients to invest in thousands of no-load, no-transaction-fee mutual funds from multiple fund families through one consolidated source. Other funds available in Mutual Fund Marketplace may include a transaction fee.

What is the difference between early payout and early settlement?
Early payouts are handled by the AS Service Teams and are reviewed for approval on a case-by-case basis. Applicable fees may apply. For additional information, contact your Schwab service team.

Early settlements apply to equities and must be requested prior to placement of trade. Contact the equity trading desk for additional information.

Are there any special handling instructions for Tender/Interval Funds?
Yes. Although the next redemption date for some funds can be located under the Facts & Fees tab under mutual fund research, some funds require registration with the fund company prior to tender and/or purchase. Contact the fund company or Mutual Fund Trading Desk Tooltip for additional information.

How can I cancel or correct mutual fund trades after they have been executed?
Schwab will make every effort to correct the trades as intended in a timely fashion. A verbal or written request is not an agreement by Schwab that a trade adjustment will be made. However, there are some instances in which trades can only be corrected on or after settlement date.

  • If the trade is executed in an incorrect account, complete the Cancel Rebill Request form and fax to the trading desk at 877-429-4712. Certain circumstances require end client's signature. If an account holder's signature is required, also submit the Addendum to Cancel Rebill Request form.
  • If an error consists of quantity adjustment or cancellation of a trade, contact the trade corrections desk at 800-367-5198 option 6.

How to trade equities, mutual funds, and options through the Web Trading platform
How to trade fixed income securities
Introduction to equity trading
Introduction to fixed income trading
Introduction to investment research
Introduction to Schwab Alliance
Introduction to the Web Trading platform

See the Charles Schwab Pricing Guide for fee information.

As outlined in the Charles Schwab Pricing Guide, electronic trades in certain funds may qualify for a Reduced Transaction Fee. See the most recent List of Mutual Funds Eligible for a Reduced Transaction Fee for more information. This list is also available to your clients on Schwab Alliance.

As noted on page one of the document, this list is not “real-time”, and is generally updated on a monthly basis. However, you can verify whether a trade is eligible for the Reduced Transaction Fee through the online trading system. Specifically, the transaction fee will appear in the Validation Messages, which you can view before confirming whether you’d like to place the trade order, so long as you have not suppressed these messages. You can change your settings under Trading Preferences > Error Message Suppression > Mutual Fund.

Should you have any additional questions, please reach out to your Relationship Manager or Account Management Team.

Access the Research page on Schwab Advisor Center for fund-specific information pertaining to offshore funds, fees, cutoff times, and settlement information.

To learn more about mutual fund trading, contact the Schwab Mutual Fund Trading Desk at 800-367-5198, option 2.