redeem
Redeem means to cash in an investment, like a bond or fund unit, and collect the money owed to you, often with interest included.
In plain English
There is a particular joy that hits when a market woman finally pays back the small loan you gave her three months ago, principal and a little extra for your patience. That exact feeling, but wearing a suit and sitting inside a bank system, is what happens when you redeem an investment.
Redeeming simply means you are handing back the thing you were given proof of ownership for, a bond certificate, a treasury bill, units in a mutual fund, and collecting the cash that comes with it. You are closing out the arrangement and taking your money home.
Say your aunty in Lagos put ₦500,000 into a federal government bond three years ago, one that promised 14 percent yearly interest and a return of the full amount at the end of the term. When that term ends, she does more than get a thank you message. She redeems the bond, meaning the government pays back her ₦500,000 principal, and she has already been collecting interest along the way.
In the United Kingdom, someone holding units in a money market fund through their pension platform might redeem part of it to pay for a car repair, and the fund manager sells the underlying assets to release the cash within a few working days.
For the Nigerian abroad sending money home, redeeming matters too. If you parked some savings in a fixed income fund before travelling and now need the cash for rent in Manchester, you redeem your units, and the value lands in your account based on that day's price, not the price you bought at.
Some investments let you redeem anytime, others tie your hands until a maturity date, and breaking that early attracts a penalty. Always check which type you are holding before you assume the money is waiting for you whenever you snap your fingers.
Uche buys ₦200,000 worth of a fixed term investment fund promising 12 percent yearly return over two years. At maturity, he redeems his units and receives ₦248,000, his original ₦200,000 plus ₦48,000 in interest earned.
Questions people ask
Can I redeem my investment before its maturity date?
Sometimes, but many bonds, fixed deposits and locked funds charge an early redemption penalty or give you a lower rate if you cash out before the agreed date, so check the terms first.
How long does it take to receive money after redeeming?
It depends on the investment. Money market funds often pay out within one to three working days, while some bonds or structured products can take longer, especially if they need to settle through a registrar.
Is redeeming the same as selling?
Not quite. Selling usually means trading your investment to another buyer on an exchange, while redeeming means returning it directly to the issuer or fund manager in exchange for cash.
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