Redemption fee?

[34saving]

It's that time of year again . . . .time to pick the ROTH mutual funds . . .or at least start thinking about it. I've been looking at no load, no transaction fee funds and have come across some funds with a "2% redemption fee". Note it doesn't say early redemption fee. Does that mean I would have to pay 2% of the accumulated value when I sell? Doesn't that sound a whole lot like a back end load? Am I missing something here?

[safari]

Re: Redemption fee?

I am pretty sure it's the early redemption fee. You have to read the fund's prospectus to know for sure and to find out how many months you have to keep your money invested in that fund to avoid paying the early redemption fee.

[kv968]

Re: Redemption fee?

It's that time of year again . . . .time to pick the ROTH mutual funds . . .or at least start thinking about it. I've been looking at no load, no transaction fee funds and have come across some funds with a "2% redemption fee". Note it doesn't say early redemption fee. Does that mean I would have to pay 2% of the accumulated value when I sell? Doesn't that sound a whole lot like a back end load? Am I missing something here?

It most likely is an early redemption fee as safari pointed out, but it could be a back-end load disguised as a fee also. Vanguard has something similar with their emerging markets index. It has a 0.5% purchase and redemption fee however it's not considered a front- or back-end "load" because the fee is paid directly to the fund. You have to watch semantics here so read the prospectus carefully. If it's an early redemption fee, that's totally understandable, but if it's a flat out redemption fee of 2% no matter how long you hold onto the fund, I don't care where the fee goes, I'd treat it like a back-end load.

[34saving]

Re: Redemption fee?

Okay, after digging and digging through the prospectus of one of the funds in question it turns out the "redemption fee" only applies if one sells within 7 days of buying the fund. The problem? The fund screener I'm using doesn't tell me the nature of these fees, so it looks like I'll be hunting through a few more prospecti before this is said and done. Sometimes I wonder if due diligence is overrated Thanks for the hints!

[kv968]

Re: Redemption fee?

Okay, after digging and digging through the prospectus of one of the funds in question it turns out the "redemption fee" only applies if one sells within 7 days of buying the fund. The problem? The fund screener I'm using doesn't tell me the nature of these fees, so it looks like I'll be hunting through a few more prospecti before this is said and done. Sometimes I wonder if due diligence is overrated Thanks for the hints!

What fund is it that you're looking at may I ask? I've never really heard of a redemption fee from selling within 7 days. Usually it's a more volatile fund and the redemption fee is for anything sold within 2 months. Also, what fund screener are you using?