Exchange Privilege

Exchange Privilege - An exchange privilege is a special feature, which are offered in some of the mutual funds families which allow investors to switch, or swap, from one mutual fund with a family unit to another within the same family fund unit, without paying any additional sales charges. The IRS considers this a sales and a purchase when it comes to tax purposes. This is beneficial when stock market conditions change. You are likely going to want an aggressive growth fund on an increasing market, but a bond fund when the market is decreasing. Usually, there is a limit as to how many times each year you can do this.