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What Is Exit Load In Mutual Fund?

10 Mins 25 Jul 2023 0 COMMENT

When investing in mutual funds, there are usually three kinds of charges that mutual fund companies levy upon investors – Total Expense Ratio (TER), Entry Load and Exit Load.

The expense ratio is simply the commission a mutual fund company charges for managing the money. This is usually in the range of 0.1% to 2.5% and is charged at periodic intervals by every mutual fund scheme.

Entry load is a one-time fee that mutual fund companies charge investors at the time of the initial stage of the investment purchase. Entry load is something that is not charged by every mutual fund. This is usually 0.1% to 1.5%. 

What is the exit load?

Exit load, on the other hand, is a fee charged by mutual funds when an investor sells or redeems their units before a certain period of time has elapsed. You also have to pay the exit load even if you are booking a loss when selling mutual fund units. Additionally, exit load is charged even when you are switching from one fund to another or have applied for a systematic transfer plan (STP) or systematic withdrawal plan (SWP).

This fee is typically a percentage of the amount being redeemed and is meant to discourage investors from frequently buying and selling mutual fund units, which can disrupt the fund’s management and performance.

Exit load is not charged on top of the investment amount but is simply deducted from the redemption amount. Mutual fund companies and distributors will usually tell you beforehand if they charge any exit load. Nonetheless, make sure to read the fund’s prospectus carefully if they fail to tell you.

Exit loads can vary widely depending on the mutual fund, and may be higher for funds that invest in less liquid securities or have higher management fees. It is important for investors to be aware of any exit loads associated with a mutual fund before investing and to factor this cost into their decision-making process.

Mutual fund companies, if they are charging, usually charge higher exit loads in equity funds than in debt funds because equity funds are meant for long-term investment tenures.

Now you know what is exit load, let us understand how to calculate exit load in mutual fund.

How to calculate exit load?

To calculate exit load in mutual fund you need to be aware of two things – the fees charged by mutual funds as a percentage of the redemption amount and the exit load period. You also need to be aware of the net asset value (NAV) of the fund.

Let us assume there is an equity fund that charges 1% of the redemption amount as the exit load in case you redeem your investment within one year of investing. There are two scenarios here: lump sum investment and SIP investment.

Lump sum investment

In the case of lump sum investment, the calculation is fairly simple. Let us assume that you bought 1,000 units of the aforementioned mutual fund at a net asset value (NAV) of Rs 50. In five months or 150 days, you sold your entire investment at a NAV of Rs 55.

Your initial investment amount was Rs 50 x 1,000 units = Rs 50,000. In five months, the value of the fund is Rs 55 x 1,000 units = Rs 55,000. However, since you are selling the investment, and there is an applicable exit load, the redemption amount will be different:

Exit load: 1% of (Rs 55 x 1,000) = Rs 550. This amount will be deducted from the value of the investment at the time of redemption.

The eventual redemption amount will be Rs 55,000 – Rs 550 = Rs 54,450.

SIP investment

In the case of investment via systematic investment plan (SIP), the calculation is a little trickier given the NAV and period of investment vary for each instalment. For the sake of calculation, let us assume, you keep buying 100 units of the aforementioned fund at an average NAV of Rs 100 per unit. You start your SIP in November 2020 and continue it until January 2022.


Now, you need money in February and plan to sell 1,000 units from the fund on February 1, 2022. In SIP withdrawals, the oldest bought units are sold first. Thus, the exit load will not be applicable on the entire sale but only on those units that are yet to complete 365 days.

From the table above, we can see first 400 units have completed 365 days or more. Thus, there will be no exit load on this. Exit load will be applicable on the next 600 units that you have sold.

Exit load = 1% of (units x NAV)

                  = 1% of (600 x 100)

                  = Rs 600

Hence the total redemption amount will be,

= Rs (1000 x 100) – 600

= Rs 100000 – 600

= Rs 99,400

Disclaimer: ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Name of the Compliance officer (broking): Ms. Mamta Shetty, Contact number: 022-40701022, E-mail address: complianceofficer@icicisecurities.com. Investments in securities markets are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.