Redemption Fee
Barron's Finance & Investment Dictionary:
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Redemption Fee
fees charged by a mutual fund on shareholders who sell fund shares within a short period of time. The time limit and size of the fee vary among funds, but the redemption fee usually is a relatively small percentage (1% or 2% of the amount withdrawn).
Some mutual funds charge a small flat redemption fee of $5 or $10 to cover administrative charges. The intent of the redemption fee is to discourage rapid-fire shifts from one fund to another in an attempt to “time” swings in the stock or bond market. This fee often is confused with the contingent deferred sales charge, or back end sales charge, typically a feature of the broker-sold fund.
See also mutual fund share classes.
Some mutual funds charge a small flat redemption fee of $5 or $10 to cover administrative charges. The intent of the redemption fee is to discourage rapid-fire shifts from one fund to another in an attempt to “time” swings in the stock or bond market. This fee often is confused with the contingent deferred sales charge, or back end sales charge, typically a feature of the broker-sold fund.
See also mutual fund share classes.
| Redemption Date, Redemption | |
| Redemption Price, Rediscount |
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Redemption Fee
Investopedia Financial Dictionary:
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Redemption Fee
A fee collected by an investment company from traders practicing mutual fund timing. This stiff penalty is used to discourage short-term, in-and-out trading of mutual fund shares. Generally, the fee is in effect for a holding period from 30 days to one year, but it can be in place for longer periods.
Also referred to as an "exit fee", "back-end load" or "contingent deferred sales charge".
Investopedia Says:
Mutual fund timing is a legal but frowned-upon practice that has a negative effect on a fund's long-term investors. Mutual fund timing means that investors may be subjected to higher fees occasioned by the transaction costs of the short-term trading of fund shares.
After the designated minimum holding period for an investment in a fund has elapsed, investors are not charged for redeeming shares of the investment. If incurred, redemption fees do not go to the investment company, but are credited to the fund's assets.
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Barron's Finance & Investment Dictionary
Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
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