The broker told me not to sell because the mutual fund I owned had a 2% call fee and I would be penalized if I did.

I got to thinking about it and did some simple math to see how much it would cost me if I sold. Several months ago I bought $5,000 from the fund. Fortunately, it was without charge, so they did not charge me any commission. It appears that the brokerage house has instituted this fee for the sole purpose of dissuading me from selling it.

Now you could sell it for $5,500 and make a nice profit of $500 in the last 3 months. Your 2% charge would be $110. In other words, they were charging me 22% of my winnings, which can easily be calculated as $110/$500. That is a far cry from 2%. What a rip! My net now was $390.

More and more brokerage and mutual fund companies are adding redemption fees. No-load mutual funds add fees even when you have an account with the fund family. Because? Fund managers are paid their 6-figure salaries not by how much profit they make for you, but by how much money they manage. He can make a lot of money for himself while you lose.

The general idea of ​​the mutual fund was to have a professional manager make money for you, but last year over 95% of stock mutual funds lost money. It’s pretty obvious you don’t need this guy to wreck your money.

In the future, before you buy any funds, ask the broker if there is any kind of redemption fee. If there is, look for another fund and/or another broker. Discount brokers are the best because your brokers can’t give you advice. You will find that a broker’s advice is praise for his money.

Redemption fees are like a ball and chain in your ability to make money. Any professional trader (and I was a floor trader for 17 years) will tell you that a small loss is fine, but never allow yourself a big loss. Brokerage firms and funds impose excessive fees to prevent you from selling a losing position. The broker does not make money if his cash is in a money market account, so he will do everything legally possible to prevent you from selling.

Buy and hold may be fine for long-term bull markets, but during the current long-term bear market, you should be able to sell without adding damage to the insult. Redemption fees are a method to intimidate the investor from selling a losing position. Don’t buy anything that comes with a ball and chain.