MygoalMySip

  • Mutual Funds
    • Mutual Funds
    • Equity Fund
    • Debt Fund
    • Hybrid Fund
  • Stocks
    • Stocks
    • Large Cap
    • Mid Cap
    • Small Cap
  • Personal Finance
    • Personal Finance
    • Savings
    • Tax
Menu
  • Mutual Funds
    • Mutual Funds
    • Equity Fund
    • Debt Fund
    • Hybrid Fund
  • Stocks
    • Stocks
    • Large Cap
    • Mid Cap
    • Small Cap
  • Personal Finance
    • Personal Finance
    • Savings
    • Tax
My-Goal-My-Sip-Final-Logo
Search
Close
My-Goal-My-Sip-Final-Logo
  • Mutual Funds
    • Mutual Funds
    • Equity Fund
    • Debt Fund
    • Hybrid Fund
  • Stocks
    • Stocks
    • Large Cap
    • Mid Cap
    • Small Cap
  • Personal Finance
    • Personal Finance
    • Savings
    • Tax
Login or Sing up

What is Exit Load?

January 21, 2022
in Learn, Personal Finance, Savings
exit
 

Definition:

Mutual Funds are those funds that have a pool of investments drawn from various investors having the same investment objectives. However, if a person or fund manager wants to manage these funds alone for the investors, then it is quite difficult for him or her to do so; here the AMCs (Asset Management Companies) comes into the scene. 

These AMCs manage the investors’ funded fund and ensures the investments move in the growth direction. Whenever an investor exits or redeems the unit of a fund, then a small number of fees are charged to them by the AMCs. The above fee is called the Exit load. 

In short, an exit load is a fee charged by the AMCs (Asset Management Companies) to the investor at the time of retrieving or exiting the units of the mutual fund. 

Why is it Levied? 

The major reason for levying exit load is to demoralize investors from backing out and pulling out their investments before the lock-in period expires. In addition, the exit load fee may also minimize the withdrawal numbers from the mutual fund schemes. However, not every fund levies an exit charge on its investors. Therefore, you need to keep in mind the ‘exit load aspect’ at the time of choosing a plan to invest in. 

What is Exit Load in Mutual Funds? 

Exit load charges in mutual funds are generally a percentage of the NAV (Net Asset Value) of the mutual fund an investor owns. The Net Asset Value (NAV) is the net value of a unit or entity and is calculated as the unit’s assets minus the value of its liabilities. 

Generally, the AMCs take off the exit load from the total NAV, and the remaining amount gets credited to the account of the investor. 

For example, if the load exit charge levied on an annual one-year system is 3% and is reimbursed within 4 months, well before the agreed investment period. As a result, an exit load enters the scene. If the NAV of the fund is Rs.60 at the time of redemption, the exit fee charged would be 3% of Rs. 60 which, is equal to 1.8. After subtracting this amount from the NAV, which is Rs. 58.2 gets credited to the investor’s account. Furthermore, if the investor fulfills the agreed possession of the funds, then he/she won’t have to pay the exit load during the time of redemption. 

Calculation of Exit Load in Mutual Funds? 

The rates of exit load depend on the different types of mutual funds; different mutual funds impose different exit loads. 

Assume that an investor invested Rs. 30,000 in a Mutual Fund scheme in January of 2018. The plan has an exit load of 1.2% if redeemed or withdrawn before 1 year. The NAV is Rs. 120 which means that the investor has 250 units. Now, if the investor wants to withdraw the units after 4 months, i.e., in May 2018. In this case, the investor will be charged an exit load according to the calculation: 

Amount invested in January 2018 

30,000 

NAV at the time of investment 

120 

Units Bought 

30000/120=250 

NAV at the time of redemption 

105 

Exit Load 

1.2% of (105*250) = 315 

Final Redemption Amount 

26250-315 = 25935 

Exit Loads on various mutual funds: 

Different mutual funds charge a rate of exit load which is different from each other. Although, not all mutual funds charge exit load on their investors. It is preferable to examine the exit load of the mutual fund schemes you are desired to invest in. Let’s explore out some rates on mutual funds. 

Mutual funds for each of your goals: 

  1. Instant investment.
  2. Zero commission.
  3. Completely paperless.
  4. There is no entry or exit load levy on Liquid Funds. This means that the investors can withdraw or redeem the investments whenever they wish and the money will be credited to their bank accounts by the very next day.
  5. Debt Funds can have an exit load sometimes. However, one can avoid the expense by adjusting the investment occupancy with the time period for which the fund charges an exit load.

Exit Load on SIP:

A maximum number of investors are typically puzzled to understand the concept of ‘Exit Load’ while investing through a SIP. An ordinary conception of the investors is if they have commenced or started a SIP a year ago, then they won’t be charged with any exit load if they sell the investment between the particular time. 

The truth is, most of the investors are getting it incorrectly. In fact, the Exit load on SIP is considered to be almost similar to all the other mutual funds. A time span of 1 year is important to complete for each installment of a SIP to escape the exit load for the same. 

For example, if you have invested in a SIP for two years, you need to wait for one more year, i.e., three years in total to get rid of the exit load. 

Conclusion: 

Exit Fee is an essential factor for an investor to be well informed of while investing. You should be ultra-careful before proceeding with a Mutual Fund scheme as it assists you to evaluate the returns once all the other expenses are solved. No investor would ever wish to receive a fine in the form of an exit load unknowingly. Exit Load can take a toll on you and your pre-planned investments; it can be ignored if you plan your sale of units judiciously. 

Read Next: “Duration of investment”

For more information, reach us at [email protected]

Team, MyGoalMySip.

Tags: EXIT LOADFUNDSINVESTMENTMUTUAL FUNDMUTUAL FUNDS
ShareTweetPin

Related Posts

crypto
Personal Finance

Crypto Crash

2022 has not been a very great year for crypto investors, as we set foot in 2023 it's pertinent for...

January 28, 2023
layoff
Personal Finance

How to be financially prepared for the “layoff season”?

Most of us, or even someone we know, have gone through a layoff at some point in our lives. Regardless...

December 6, 2022
RBI’s Central Bank Digital Currency (CBDC)
Personal Finance

RBI’s Central Bank Digital Currency (CBDC)

CBDC or Central Bank Digital Currency is legal tender in digital form, which means it holds the same value as...

December 6, 2022
Economic Outlook: November 2022
Personal Finance

Economic Outlook: November 2022

The world has no chill, like the troubled kid in the neighborhood. From COVID-19 to war to economic inflation, there...

November 29, 2022
Next Post
load

What is Load in a Mutual Fund? 

index

ETF's vs. Index Funds

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Recommended

schemes

Different types of schemes in the Debt Fund.

January 21, 2022
equity

Advantages vs. disadvantages of Equity Shares.

January 21, 2022
pw

PW Insider: November Edition 2021

May 19, 2022
UPI

UPI: United Payment Interface

November 4, 2022

subscRibe!

Categories

  • Books
    • Monthly Journal
  • Debt Fund
  • Equity Fund
  • Hybrid Fund
  • Large Cap
  • Learn
  • Mid Cap
  • Mutual Funds
  • Personal Finance
  • Savings
  • Small Cap
  • Stocks
  • Tax
  • Uncategorized

Instagram

About Us

MyGoalMySip is an Online Mutual fund investment platform powered by Prudent Wealth. As an investor, it might be hard to find the perfect investment opportunity; therefore, we’re here to help you make an informed decision.

Our goal is to educate people and make them financially literate, and at the same time guide you in your investment journey, in short MyGoalMySip is your investment buddy.

Read More
Facebook Twitter Youtube Linkedin

Quick Links

  • Books
  • Learn
  • Monthly journal
  • Merchandise

    Copyright © 2023 MygoalMySip | All Rights Reserved

    About Us

    MyGoalMySip is an Online Mutual fund investment platform powered by Prudent Wealth. As an investor, it might be hard to find the perfect investment opportunity; therefore, we’re here to help you make an informed decision.

    Our goal is to educate people and make them financially literate, and at the same time guide you in your investment journey, in short MyGoalMySip is your investment buddy.

    Read More
    Facebook Twitter Youtube Linkedin

    Quick Links

    • Books
    • Learn
    • Monthly journal
    • Merchandise

      Copyright © 2023 MygoalMySip | All Rights Reserved