What's the Difference Between Back-End Loads and Redemptions?

Redemption fees exist solely to compensate the investors who remain in the fund, so they don't suffer because of other investors' premature exits. But redemption fees are generally very short term -- often no more than 30 days -- after which time an investor can sell without penalty. The SEC is considering implementing a mandatory 2% redemption fee for all funds (save money market accounts) that would expire after five days. Such a short redemption fee period is aimed purely at discouraging market-timers.

So while it's true that by exiting one of the maligned funds and investing in a more stalwart (and no-load) company like Vanguard an investor could end up in a fund with a redemption fee, that would only be an issue for those who plan to exit the fund in fairly short order. And even with a redemption fee, that move can hardly be considered going from the frying pan into the fire -- companies that sell no-load funds such as American Century, Fidelity, T.Rowe Price(TROW), TIAA-CREF and Vanguard generally charge much lower fees overall and have a more investor-friendly overall investment strategy.

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