What is an exit load, and when is it applicable?

What is an exit load, and when is it applicable?

What is Exit Load in Mutual Funds?

Exit Load is a fee charged by an Asset Management Company (AMC) when an investor redeems (sells) mutual fund units partially or fully before a specified holding period. The details of the applicable exit load and the minimum holding duration are clearly mentioned in the scheme’s Scheme Information Document (SID).

The purpose of charging an exit load is to discourage early withdrawals and to protect long-term investors from the impact of sudden redemptions.

Example:
 If a mutual fund scheme has a 1% exit load for redemptions within 1 year, and you sell ₹50,000 worth of units within 6 months, you’ll pay ₹500 as exit load.

Key Highlights:

  • Not all funds have exit loads. Many debt or index funds have zero exit load after a short period.

  • The fee collected goes to the fund, not the AMC, and helps maintain stability.

  • Exit loads typically apply to equity and hybrid funds with longer holding goals.

    • Related Articles

    • Do ETFs have entry or exit loads like mutual funds?

      ETFs usually do not charge any entry load or exit load when you buy or sell share. ETFs are designed to be passively managed and traded on exchanges, which eliminates the need for entry or exit loads.

    • Can I switch from one mutual fund to another?

      Yes, you can switch from one mutual fund to another, but the process varies depending on the type of funds and the investment platform you are using. Here’s a detailed breakdown of how it. 1. Switching Within the Same Fund House (Same AMC) If both ...

    • How can I choose the right mutual fund for my investment goals?

      Choosing the right mutual fund depends on your financial goals, risk tolerance, and investment horizon. Here's how you can make an informed decision: Identify Your Investment Goal Wealth Creation (Long-term goals like retirement): Choose equity ...

    • What is STP (Systematic Transfer Plan), and how does it work?

      A Systematic Transfer Plan (STP) allows investors to strategically move a predetermined amount of money from one mutual fund scheme to another at fixed intervals. This approach facilitates disciplined and systematic investing, helping to optimize ...

    • Do I need to pay any fees to the distributor or platform for investing?

      In most cases, you don’t need to pay any extra fees directly to the distributor or investment platform. However, here’s what you should know: Regular vs Direct Plans: If you invest in a regular plan, the distributor/platform earns a commission from ...