When to liquidate mutual funds for a home downpayment
"This question is calling for a somewhat subjective answer. What I would recommend is liquidate now, since it is a stock fund and stocks have performed very well this year, no need to be greedy and hope that they do as well in 2014. Since it is not an enormous amount of money, put it in an interest yielding savings account which unfortunately are all sub 1%. But the key here is since we cannot predict the markets, no investment is going to be ""safer"". You want the 18k to be there when you need it for the down payment. If you invest it in a fund now, you may not be able to get at least 18k at the time you are forcing yourself to liquidate. A good rule for investing is never to have to sell to make a purchase because there is a high probability that you will be selling at a sub-optimal price. Some savings accounts that have slightly higher yields. http://money.cnn.com/2013/10/01/pf/savings-account-yields/"
"Usually there are annual or semi-annual reports for a mutual fund that may give an idea for when a fund will have ""distributions"" which can cause the NAV to fall as this is when the fund passes the taxable liabilities to shareholders in the form of a dividend. Alternatively, the prospectus of the fund may also have the data on the recent distribution history that is likely what you want. If you don't understand why a fund would have a distribution, I highly suggest researching the legal structure of an open-end mutual fund where there more than a few rules about how taxes are handled for this case." "This answer is applicable to the US.  Similar rules may hold in some other countries as well.   The shares in an open-ended (non-exchange-traded) mutual fund are not traded on stock exchanges and the ""market"" does not determine the share price the way it does for shares in companies as brokers make offers to buy and sell stock shares. The price of one share of  the mutual fund (usually called Net Asset Value (NAV) per share) is usually calculated at the close of business, and is, as the name implies, the net worth of all the shares in companies that the fund owns plus cash on hand etc divided by the number of mutual fund shares outstanding. The NAV per share of a mutual fund might or might not increase in anticipation of the distribution to occur, but the NAV per share very definitely falls on  the day that the distribution is declared. If you choose to re-invest your distribution in the same fund, then you will own more shares at a lower NAV per share but the total value of your investment will not change at all.  If you had 100 shares currently priced at $10 and  the fund declares a distribution of $2 per share, you will  be reinvesting $200 to buy more shares but the fund will be selling you additional shares at $8 per share (and of course, the 100 shares you hold will be priced at $8 per share too.  So, you will have 100 previous shares worth only $800 now + 25 new shares worth $200 for a total of 125 shares at $8 = $1000 total investment, just as before. If you take the distribution in cash, then you still hold the 100 shares but they are worth only $800 now, and the fund will send you the $200 as cash. Either way, there is no change in your net worth. However, (assuming that the fund is is not in a tax-advantaged account), that $200 is taxable income to you regardless of whether you reinvest it or take it as cash. The fund will tell you what part of that $200 is dividend income (as well as what part is Qualified Dividend income),  what part is short-term capital gains, and what part is long-term capital gains; you declare the income in the appropriate categories on your tax return, and are taxed accordingly. So, what advantage is there in re-investing? Well, your basis in those shares has increased and so if and when you sell the shares, you will owe less tax. If you had bought the original 100 shares at $10 and sell the 125 shares a few years later at $11 and collect $1375, you owe (long-term capital gains) tax on  just $1375-$1200 =$175  (which can also be calculated as $1 gain on each of the original 100 shares = $100 plus $3 gain on the 25 new shares = $175). In the past, some people would forget the intermediate transactions and think that they had invested $1000 initially and gotten $1375 back for a gain of $375 and pay taxes on $375 instead. This is less likely to occur now since mutual funds are now required to report more information on the sale to the shareseller than they used to in the past. So, should you buy shares in a mutual fund right now? Most mutual fund companies publish preliminary estimates in November and December of what distributions each fund will be making by the end of the year. They also usually advise against purchasing new shares during this period because one ends up ""buying a dividend"".  If, for example, you bought those 100 shares at $10 on the Friday after Thanksgiving and the fund distributes that $2 per share  on December 15, you still have $1000 on December 15, but now owe taxes on $200 that you would not have had to pay if you had postponed buying those shares till after the distribution was paid. Nitpickers: for simplicity of exposition, I have not gone into the detailed chronology of when the fund goes ex-dividend, when the distribution is recorded,  and when cash is paid out, etc., but merely treated all these events as happening simultaneously." "According to the FT article mentioned in the Reuters piece:  ""GSAM blamed the large outflows this year on investors pulling out of its money market funds, short-term investment vehicles that provide clients with a liquid alternative to cash. A spokesman added that the company’s mutual fund range, excluding money market funds, had inflows so far this year.""  also this...  ""Traditional asset managers such as Goldman, which has the majority of its assets in actively managed funds, have been hurt by investors dumping stockpickers for cheaper passive funds that track an index  (...)  Last year, bosses at the fund division told GSAM’s 2,000 employees that they must cut spending and banned all travel that was not associated with meeting clients and winning new business (...) Earlier this year, the company shut down the London operations of its internal hedge fund, which sits in investment banking, and told staff to move to the US or find a new job internally (...) The company has been affected by changes in the US money market sector, where new rules to strengthen investor protection and liquidity in the strategies were introduced last year. The prospect of rising interest rates and the potential for better returns are also making investors consider other investment funds.""   Source: That FT article" "A mutual fund could make two different kinds of distributions to you: Capital gains: When the fund liquidates positions that it holds, it may realize a gain if it sells the assets for a greater price than the fund purchased them for. As an example, for an index fund, assets may get liquidated if the underlying index changes in composition, thus requiring the manager to sell some stocks and purchase others. Mutual funds are required to distribute most of their income that they generate in this way back to its shareholders; many often do this near the end of the calendar year.  When you receive the distribution, the gains will be categorized as either short-term (the asset was held for less than one year) or long-term (vice versa). Based upon the holding period, the gain is taxed differently. Currently in the United States, long-term capital gains are only taxed at 15%, regardless of your income tax bracket (you only pay the capital gains tax, not the income tax). Short-term capital gains are treated as ordinary income, so you will pay your (probably higher) tax rate on any cash that you are given by your mutual fund. You may also be subject to capital gains taxes when you decide to sell your holdings in the fund. Any profit that you made based on the difference between your purchase and sale price is treated as a capital gain. Based upon the period of time that you held the mutual fund shares, it is categorized as a short- or long-term gain and is taxed accordingly in the tax year that you sell the shares. Dividends: Many companies pay dividends to their stockholders as a way of returning a portion of their profits to their collective owners. When you invest in a mutual fund that owns dividend-paying stocks, the fund is the ""owner"" that receives the dividend payments. As with capital gains, mutual funds will redistribute these dividends to you periodically, often quarterly or annually. The main difference with dividends is that they are always taxed as ordinary income, no matter how long you (or the fund) have held the asset. I'm not aware of Texas state tax laws, so I can't comment on your other question." Generally speaking, each year, mutual funds distribute to their shareholders the dividends that are earned by the stocks that they hold and also the net capital gains that they make when they sell stocks that they hold. If they did not do so, the money would be income to the fund and the fund would have to pay taxes on the amount not distributed.  (On the other hand, net capital losses are held by the fund and carried forward  to later years to offset future capital gains).  You pay taxes on the amounts of the distributions declared by the fund. Whether the fund sold a particular stock for a loss or a gain (and if so, how much) is not the issue; what the fund declares as its distribution is. This is why it is not a good idea to buy a mutual fund just before it makes a distribution; your share price drops by the per-share amount of the distribution, and you have to pay taxes on the distribution. Given that utilizing all the funds available to you drains your retirement and leaves you with very little cushion for unforeseen events (as already noted), it may be best to use a smaller amount for closing and just deal with the PMI for a couple years. PMI is likely less than the taxes/penalties incurred from withdrawing a full 20% + closing costs. Let alone the lost earning on the accounts (above your mortgage interest rate); but personally I think the stability of significant home equity is worth more than anticipated stock gains. I would recommend pulling enough to buy the house comfortably without dipping too deeply in any one area, while still paying down your balance to where you can eliminate PMI quickly (say 2-3 years). Your limits for each account are approximately: Roth IRAs:  Traditional IRAs: Brokerage (non-retirement): Checking: Things to consider:   If you are current on your payments, you can request PMI removal once your loan-to-value drops below 80% - it also terminates automatically when it is scheduled to drop below 78% (not if it actually has). Many loans have a 2 year minimum PMI period though, regardless of your Loan To Value (LTV) changes. LTV changes could be from: I buy or sell a few shares whenever I have a small amount of money to transfer into out of my mutual funds. Since I'm not paying transaction fees, there is no reason not to, when that is what makes sense. If you are paying a fee for each transaction, of course it makes sense to try to wait until you have a larger amount to move so the overhead per share is lower. I agree with you that you need to consolidate this debt using a loan. It may be hard to find a bank or credit organization that will give you an unsecured personal loan for that much money.  I know of one, called Lending Club (Disclaimer - I'm an investor on this platform. Not trying to advertise, it's just the only place I know of off the top of my head) that facilitates loans like this, but instead of a bank financing the loan, the loan is split up accross hundreds of investors who each contribute a small amount (such as $25). They have rates anywhere between 5-30%, based on your credit profile(s), and I believe they have some loan amounts that go up to the area that you're discussing.  Regarding buying the house - The best thing you can do when trying to buy a house is to save up a 20% downpayment, if at all possible. Below this amount, you may be asked to pay for 'PMI' - Private Mortgage Insurance. This is a charge that doesn't go away for quite a while (until you've paid them 20% of the appraised value of the home), where you pay a premium because you didn't have the 20% downpayment for the house.  I would suggest you try to eliminate your credit card debt as soon as possible, and would recommend the same for your father. Getting your utilization down and reconsolidating the large debts with a loan will help to reduce interest charges and get you a reasonable, fixed payment.  Whether you decide to pay off your own balances using your savings account is up to you; if it were me, personally, I'd do so immediately rather than trying to pay it off over time. But if you lose money to taxes by withdrawing the money from your 'tax free savings account', it may not be a beneficial situation.  Treat debt, especially credit card debt, like an emergency at all times, and you'll find yourself in a better place as a result.  Credit card debt and balances are and should be temporary, and their rates and fees are structured that way. If, for any reason, you expect that a credit card's balance will remain for an extended period of time, you may want to consider whether it would be advantageous for you to consolidate the debt into a loan, instead.