Redemption Fees Work, Says One Professor
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Wednesday, March 17, 2010

Redemption Fees Work, Says One Professor

Personal finance professor Michael Finke went on the record Tuesday to support mutual fund fees.

Finke told the Associated Press that redemption fees are ill-perceived by investors and poorly marketed by the industry. The Texas Tech University professor claims that the fees keep short-term investors from jumping in and out of the fund, an action that inflates costs and hurts long-term investors.

"They [redemption fees] are not so much a fee as a transfer from short-term to long-term investors. If you're a long-term investor, redemption fees are good for you," Finke said in the interview.

While many fund companies are currently doing away with the fees, he thinks that mutual fund companies should consider keeping them. In general, Finke feels that money managers need to be more aware of redemption fees' effect.

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