Like the debate over indexing vs. active management, the

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Vanguard Health Care fund's new redemption policy has sharply divided investors.

When Vanguard announced that it was closing its $10 billion Health Care fund last Thursday, it also revealed a new redemption fee policy. Beginning April 19, the firm will impose a 1% redemption fee for shares sold within five years of purchase. The policy applies only to shares purchased on or after that date. A 1% fee already was in effect for shares sold within one year.

Vanguard says the new redemption policy is intended to screen out "hot money" from short-term investors who are simply chasing the current returns. And it's worth reiterating that the new policy does

not

apply to existing shares or any shares purchased before April 19.

But in Tuesday's

Fund Forum, I suggested the policy might penalize long-term investors facing a liquidity crunch, wanting to reallocate assets or selling shares for tax reasons. Many of you have your own concerns and complaints.

"I stopped the $1,000 automatic monthly amount that I had going into the fund since five years is just

way

too long a time for someone like myself who is about to retire," says reader

Van Nelson

. "What if the fund starts performing poorly? The 1% fee has a tendency to make one reluctant to switch funds. Fortunately, the money presently in the account is grandfathered into the older one-year hold for no fee."

"Although I've been invested in Vanguard Health Care since 1995, the five-year waiting period is troubling," says

Ken Clepper

. "One of my biggest concerns with this investment is the possibility of some big government-run health-care system should the Democrats retain the White House and take control of one or both parts of Congress. If this were to happen, I'd be running for the hills with my redemption."

Reader

Daryl Nichols

hit the pavement a while ago. "I was in Vanguard's

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High Yield fund back in the early '90s when they first implemented their l% redemption fee. I was in

T. Rowe Price's

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High Yield fund when they put in their 1% redemption fee. My response was the same both times: Goodbye, Vanguard fund. Goodbye, T. Rowe Price fund," says Nichols. "Mutual fund companies crow about how easy it is to move money between investments, and then they put the handcuffs on you. Not on this investor they don't."

Then there are those investors who are standing in the opposite corner.

"In my view, redemption fees are justified if they achieve their purpose and, most importantly, if they are well known to prospective investors," writes

Frank Lagemann

.

Shareholder

Michael Randall

says, "You asked, 'Is Vanguard trying too hard to make investors behave in the way it sees fit?' The simple answer is yes. But investors who read the prospectus already know this is a long-term vehicle when getting into the fund, so it doesn't matter." Randall continues, "They could jack it up to 10 years for all I care.

Fund manager Ed Owens will continue to do a magnificent job for those who are willing to indeed stick to a long-term plan. Besides, it's not like there are only a handful of funds out there. If you don't like what you're watching, change the channel."

Jonathan Sherman

seconds that notion. "If you're uncomfortable with the five-year time horizon, invest elsewhere. That's the beauty of an efficient marketplace."

For now, investing elsewhere is the only option for those who don't already own shares of the fund. Vanguard says the fund will remain closed for at least six months, but probably not more than one year. Meanwhile, current shareholders still can invest up to $25,000. And periodic investments by current shareholders in automatic investment or retirement plans can continue "at current levels," says Vanguard.

Send your questions and comments to

fundforum@thestreet.com, and please include your full name.

TSC Fund Forum aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.