Redemption fees often seem like a troublesome fact of life for fund investors. Many funds impose redemption fees on shares held less than a certain time (often 90 days), and nearly all brokers charge their own short-term redemption fees (also often 90 days). But this may be changing.
Just last month, Vanguard reduced or eliminated redemption fees on 33 funds—including some funds that previously had one-year holding periods. Janus, another mutual fund giant, also removed redemption fees on eight global funds earlier this year. Over the years, many brokers have also reduced the amount of time that they require investors to own funds to avoid a fee. In 2005, for example, both Schwab and Scottrade had 180-day redemption fee periods, but today, they require just a 90-day hold. Most recently, Fidelity drastically cut its holding period from 180 days down to just 60 days.
But in some areas, brokers are adding redemption fees. Both Etrade and TD Ameritrade, for example, now charge a redemption fee on ETFs that are purchased without commissions. Whether other brokers will follow suit remains to be seen.