Definition of redemption fees

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of the fee vary among funds, but the redemption fee usually is a relatively small percentage (1% or 2% of the amount withdrawn).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.