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Some open-end mutual funds impose a redemption fee when you sell shares in the fund, often during a specific, and sometimes brief, period of time after you purchase those shares.
The fee is usually a percentage of the value of the shares you sell, but it may also be a flat fee, or fixed amount.
The purpose of the fee is to prevent large-scale withdrawals from the fund in response to changes in the financial markets, which might require the fund manager to sell holdings at a loss in order to meet the fund's obligation to buy back your shares.
- Browse Related Terms: 12b-1 fee, Back-end load, breakpoint, Contingent deferred sales load, front-end load, Fund network, Level load, load, Load fund, Mutual Fund, No-load mutual fund, Redemption fee, Sales charge, Share class, Surrender fee