In an effort to limit market timing activity, firms are increasingly attaching redemption fees to funds. As of the end of March, 585 funds charged redemption fees, up 82 percent from the end of 1999, according to a study by Financial Research Corporation of Boston.

"Increasingly ... individuals are eschewing the buy-and-hold mantra, believing that active sector rotation and dynamic asset allocation strategies can result in superior returns," according to the FRC study. "This disruptive movement of assets in and out of funds forces a portfolio manager to either maintain excessive cash reserves or sell securities unwillingly in order to meet redemption requests."

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