Redemption

In finance, redemption refers to the process of repaying, repurchasing, or reclaiming a financial asset such as a bond, mutual fund share, or preferred stock—either at maturity, before maturity, or at a contractually predetermined time and price. For bonds, redemption typically occurs when the issuer pays back the principal (face value) to the bondholder at maturity or via an early call provision; for mutual funds, it means selling shares back to the fund company for their current net asset value (NAV). Redemption provides liquidity to investors and closes the investment, often triggering possible tax consequences based on capital gains or losses. The terms and conditions of redemption, including prices and timing, are specified in the investment's offering documents or prospectus.