What is Exit Load in Mutual Funds?

What is Exit Load in Mutual Funds

The liquidity of a mutual fund is an important factor that makes it an attractive investment for investors. Since managed by AMC, mutual funds imply charges, and it is known as exit load.

Mutual funds are available for purchase and redemption at any time, making it easier to meet financial responsibilities at any time.

Even though speedy withdrawals are permitted, many mutual fund schemes impose an exit load that can eat up a portion of your mutual fund investment’s gains.

What is exit load on mutual fund?

Exit loads are fees assessed by mutual fund companies when participants partially or entirely withdraw from a scheme within a predetermined time frame after investing.

Several plans have no departure fees. Exit loads are imposed by mutual funds to deter investors from selling their shares before a set deadline. This is carried out to safeguard the financial interests of all plan participants, particularly those who have kept their investments.

As an exit load, many mutual fund companies impose varying fees for various schemes. If you intend to invest for a brief period of time, knowing the exit load structure of the scheme will help you make smart investment choices.

Mutual fund exit loads are fees assessed by mutual fund houses if investors partially or fully exit a scheme within a specific time frame following the date of investment, as stated in the Scheme Information Document. Certain schemes do not impose an exit fee.

Mutual funds charge an exit load to deter investors from selling their shares before a set deadline. All investors in the scheme are financially protected by doing this, especially those who have kept their investments.

Different mutual fund companies impose different exit loads on various schemes. Understanding the exit load structure of the scheme will help you make wise investment decisions if you plan to invest for a brief period of time.

Exit Loads of Various Types of Mutual Funds:

Exit loads aren’t applied systematically across all open-end investment company schemes. For investments lasting up to two years, some open-end investment company schemes may impose exit loads, while others may only do so for investments lasting seven days or less.

In addition, several schemes may decide to not impose any exit load in any respect. The final exit load recommendations for many open-end investment company categories are as follows:

  • On Overnight schemes, there’s no exit load fee.
  • In liquid funds, if the investment length is a smaller amount than seven days, a hierarchical exit load is also assessed. As a result, because the holding length lengthens, the exit load step by step decreases.
  • If the holding amount is a smaller amount than the intervals starting from one month to 1 year, exit loads are generally obligatory on redemptions by debt funds.
  • If the holding length is between one and 2 years, equity funds might ordinarily impose an Associate in Nursing exit load on redemptions.

Exit Load Calculation in Mutual Funds

Exit loads are small fines levied by AMCs to deter early redemptions or withdrawals from mutual funds. Exit loads can be learned more about here. Each investment or SIP is subject to the exit load specified in the factsheet for the month in which the fund was acquired.

A mutual fund’s exit load is determined using the fund’s net asset value (NAV). Here is an illustration of exit loads:

Let’s imagine you invested Rs. 5000 in X mutual fund on January 1, 2022, and the fund’s factsheet states that the exit load is 1%.

Let’s assume that the fund’s NAV is Rs. 50. The NAV is determined as follows. Consequently, you would have gotten 100 units back for your investment.

You decide to redeem the mutual fund on February 1st, 2022, and you submit a redemption request. Your mutual fund’s NAV is currently Rs. 60.

What happened to Performance with a 1% Exit Load?

The 1% exit load is subtracted from the most recent NAV (the NAV of the day you are redeeming the mutual fund). If the NAV at the time of redemption is Rs.60, the calculation is as follows:

The redemption amount will be reduced by 1% of Rs. 60, or Rs. 0.6, multiplied by the number of units, as exit load.

0.6 (Exit Load per Unit) * 100 (Total Number of Redeemed Units) = Rs.60 (Exit Load Amount)

Your investment (Redeemable amount) is Rs.6000 – Rs.60 = Rs.5940. This method is used to calculate the Exit Load.

Exit Loads for SIP (Systematic Investment Plans):

With Systematic Investment Plans (SIPs), you can make regular, affordable investments over time. You must take into account each SIP investment separately when it comes to the exit load idea.

For instance, each payment would be taken into account for calculating the exit load if you had made 12 SIP investments and the mutual fund scheme charged an exit load in the event of redemption within a year.

The first installment would have finished 12 months and be exit load-free in the 13th month. Similar to this, the free redemption of the second installment would be permitted on the 14th month, the third installment on the 15th month, and so on.

Calculate each installment period separately to determine when the SIP would be free of the exit load.

What Does AMC Do with Exit Load?

As per SEBI’s regulation, AMCs should reinvest the exit load into the arranged portfolio. Thus, investment firms provide your information on superhighway redemption takings when keeping some redemption prices because of the exit load.

The exit load is reinvested within the portfolio to continue providing advantages to the present participants.

How to Avoid Exit Load in Mutual Funds?

You can, indeed. You can avoid the exit load if you redeem the fund after the precise time frame for which the load is applied.

To determine when the load would be appropriate, grasp the notion of exit loads.

To receive higher returns from your mutual fund investments, make sure to check the scheme’s exit load before investing in it and aim only to redeem when the exit load is no longer applicable.


  • Consequently, investors must grasp exit fees.
  • It aids in estimating returns once all prices are lined. Investment firm exit loads, once applicable, the square measure created to prevent early redemptions to guard investors’ interests within the program.
  • Before investing, you ought to continuously bear in mind the investment firm exit load or investment firm expenses of an idea.
  • The belief that the exit load time is often one year is inaccurate to be told regarding exit load, which can continuously aid in creating wise choices.
  • Begin Investing and get your money to work for you!