What is a redemption fee?

Sometimes it is called the sales fee for the departure or conditional fee for departure for the load, the redemption fee is a fee or a fee that is assessed when the investor decides to engage in the timing of the mutual fund. The reason for the fee is that the process of this strategy can have a harmful impact on long -term investors of the fund. In an effort to discourage discouraging investment in the fund for a short time before the sale of interest and switching to another investment opportunity, the redemption fee is usually significant and the prospect of using a quick breathtaking approach is less attractive. In other cases, the period that the investor must hold on stocks is longer, and one year is one of the more common periods of time related to the fee. There are situations where Tinvestor has to hold stocks for a longer period of time, such as three or five years to avoid paying the redemption fee when the stocks are placed back on the market.

The timing strategy of mutual funds, albeit legal, is not generally met with the consent of the fund administrators. The reason for this fat view of the strategy is that the purchase of shares of mutual funds then sells them immediately to achieve a small profit, the fund will cause a larger number of transaction costs. Increasing transaction costs generated by more frequent activities for purchasing and sales affects the revenues that long -term investors receive from investment. By saving the redemption fee, new investors are more likely to buy mutual funds as a long -term investment rather than a short -term way of generating revenues.

Although not all mutual funds are set in a way that enabled the type of output fee to be assessed is quite common with the resources located in many countries around the world, is quite common. For this reason, investors should look closely at the conditions that control the initial purchase of shares of mutual funds and find out if the pop is paidLatches for redemption. If there are provisions on the purchase fee, the investor should determine how long the shares must be held to prevent the fee. During this time, it is also important to project the transfer of shares prices and decide whether the return would be worth a fine or even get shares.