When we first started publishing NoLoad FundX, we could trade every month without triggering redemption fees from the fund company (discount brokers weren’t common in 1976 and noload fund shares were purchased directly from the fund company). But over time, redemption fees became more common – especially in the years after the 2003 investigations into mutual fund trading.
Some thought that fund and broker redemption fees would be the end of Upgrading, but we don’t have to trade every month to capture major market trends. We use ETFs, which don’t require a specific holding period, and we hold funds a minimum of 90 days before selling. (This month, we also began using a 90-day hold in the Star Boxes on page 4.)
Today, short-term trading fees aren’t as prevalent. Big fund companies like Vanguard and Janus recently dropped redemption fees from some of their funds, and this trend echoes what we’ve seen in NoLoad FundX’s fund listings.
We looked back 10 years to see how many of the core, diversified funds in Class 3 charge a redemption fees. The percentage of Class 3 funds that had redemption fees increased from 2002 through 2007, but the percentage has decreased in recent years — perhaps because fund companies are now competing for investor assets with exchange traded funds (ETFs), which have no minimum holding period.