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Penalty Plan |
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Penalty Plan In a mutual fund, a plan in which all sales fees are paid in the first few years of ownership in the fund. This means that if the shareholder redeems his/her shares in the first few years of ownership, sales fees are deducted, and the shareholder only receives a small portion of his/her original investment. These deductions gradually lessen with time and eventually go to zero in order to encourage long-term investment in the fund. The rules governing penalty plans were established in the Investment Company Amendments Act of 1970.
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