Redemption

A redemption is the right given to a security holder to sell, at anytime, some or all of his/her units back to the fund for cash.

When a fixed-income investment matures, and you get your investment amount back, the repayment is known as redemption.

Bonds are usually redeemed at par, or face value, traditionally $1,000 per bond. However, if a bond issuer calls the bond, or pays it off before maturity, you may be paid a premium, or a certain dollar amount over par, to compensate you for lost interest.

You can redeem, or liquidate, open-end mutual fund shares at any time. The fund buys them back at their net asset value (NAV), which is the dollar value of one share in the fund.