What is a redemption fee?

• A. A charge paid when selling an investment, such as a mutual fund or annuity.
• B. A recurring annual account maintenance fee.
• C. A tax applied to capital gains.
• D. A transaction fee charged when buying stocks.

Answer: (A)

A redemption fee is a charge you pay when you redeem or sell an investment, such as shares in a mutual fund or an annuity, often if you sell within a short time after buying. It’s meant to discourage short‑term trading and to help the fund recover costs from early withdrawals. It’s not a recurring annual fee, not a tax, and it’s not charged when you buy the investment or when you trade stocks. For example, a fund might charge a 1% redemption fee if you sell within 60 days of purchase.