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It sounds like you may need a more basic understanding of mutual funds than provided in the previous replies (which are correct). You should have had all this explained to you by your advisor at Raymond James.

1) When you invest money in a mutual fund, you are buying shares of that fund. The number of shares you buy for your investment dollars depends on what the fund's "net asset value" is at the time of purchase. So, if you invest $10000 and the net asset value at the time of purchase is $10/share, you have bought 1000 shares.

2) Over time, the net asset value changes. In good years it goes up, in bad years down. This is because the fund owns stuff whose value changes. If it is strictly a stock mutual fund, what it owns is stocks. These stocks go up and down, so even if the fund never bought or sold any of its stock holdings, the value would change. In bad years the value would go down.

3) All stock funds do buy and sell stocks. Some funds trade stocks aggressively, others make occasional adjustments to fit with changes in an index, such as the S&P 500. When the stocks they sell have gone up in value, this is a capital gain, and the investors in the fund have to pay taxes on these capital gains every year. If the stock has been held less than a year, it is a short term capital gain and is taxed at your "marginal rate" (your "tax bracket"); if the stock has been held more than a year, it is a long term capital gain and is taxed at 20%, if your tax bracket is above 15% (the long term capital gains rate is 10% if you are in the 15% tax bracket). If the fund owns stocks that give dividends, these dividends are also taxed at your marginal rate (most funds report short term capital gains and dividends together on your 1099 IRS form). Capital gains and dividends are then reinvested (if you have chosen to do this automatically, which most people do), buying you more shares in the fund.

4) Funds also sell some stocks at a loss, which partly offsets their capital gains. However, the net asset value reflects what the stocks currently owned are worth, and if the value is down that is because the stocks are worth less now than previously.

5) When you sell all or part of your investment in a mutual fund, you are selling shares you have purchased. These shares are worth whatever the net asset value of the fund is at the time you sell. The net asset value may be more than when you bought, or it may be less. You will also probably own more shares than you initially purchased, because of the reinvested capital gains and dividends. If the net asset value has gone up since you invested, you will owe capital gains taxes. Shares you have owned longer than 1 year will be taxed at the long term rate, those less than a year at the short term rate. You should receive a statement telling you what your taxes are. (If you only sell part of the fund, it is best for tax purposes to specify the sale of shares which give you the least capital gain, but this takes better record keeping and more accounting than "cost averaging").

5) If the net asset value of your shares when you sell is less than when you bought, you have a capital loss. Some of this may be a short term capital loss, some a long term. (Again you should get a statement.) You can use the capital loss to offset capital gains or take up to $3000 against your income in a given year (and carry more over to the next year).

It is unclear from your description when and how much you invested. The fund was down for 2000 (not as much as a lot of funds) and you sold in 2001. Whether you sold at a gain or a loss depends on what the net asset value was when you first invested, not just what happened in 2000. If you bought at the first value you gave, then you have a loss. Unfortunately, even if you had a loss, since you sold in 2001, you can't use that to offset the capital gain the fund had during 2000.

Incidentally, your fund had about an 8% taxable capital gain for 2000, when it probably sold quite a number of stocks at a loss. I have a couple of index funds that were down about the same % for 2000 which had less than a 1% taxable capital gain.

Good luck.
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