Here is a collection of must-see videos that will help you understand the world of mutual funds. Happy Investing!

Financial discipline is similar to going on a diet. It is never easy. There are plenty of temptations - an urge to over spend, letting emotions control your investments and confusion due to the problem of plenty - look at the plethora of options available in the market, with the returns of one scheme trying to beat the other. Who does one turn to for advice? Dependency on one person or your financial advisor alone is also tricky. Which is why people often turn to mutual funds.

The argument here is that experts are taking care of your investments. Depending on your investment appetite and risk appetite, mutual funds come with a good mix of both equity and debt, which helps you earn an interest of 12-15% or more depending on the type of investment schteme you have picked and how the markets have performed overall. Yet, selecting a mutual fund can be confounding due to the raft of choices available.

  • upcoming
    Balanced Funds
  • upcoming
    Liquid Funds
  • upcoming
    Fixed Majority Funds
  • upcoming
    Gilt Funds
  • upcoming
    Income Funds
  • upcoming
    Monthly Income Funds

Episode 17 I Intermediary

Exit Load

Exit load is the commission or charge paid when an investor exits a mutual fund. The charges are levied to discourage withdrawals by investors from mutual fund schemes. Having said that, different mutual fund houses charge different fees as an exit load. Exit loads are charged as a small percent of the Net Asset Value prevailing at the time when you sell your schemes.

Let’s say, you recently sold some of your mutual fund investment and you notice a redemption amount in your bank account, you’d realise the amount is a little less than what you’d have expected and it would leave you wondering where the money went?

Well, it would have gone in the exit load, which are imposed to discourage investors from hopping in and out of schemes. The information would be available in the scheme information document or SID.

If you have been a SIP investor you wouldn’t understand the concept of exit load. If you invest via SIPs the holding period is applicable for every instalment of SIP. Once your first SIP has completed a year only that instalment would not be charged the exit load on redemption, else all other instalments held for less than a year would have attracted an exit load.

How is it calculated?

Let’s say you sell 500 units of an equity scheme you purchased four months ago. If you redeem it before one year your exit load would be 1 percent. Let’s assume the NAV is Rs 100. You would get Rs 99 per unit (Rs 100 – Rs 1 (1 percent of 100) on redemption. The total amount which you’d get would be Rs 49,500 (Rs 99 X 500 units). It means you would have paid an exit load of Rs 500 (Rs 1 per unit)

Merging of schemes

In the near future for whatever reason the exit load will not be applicable under such circumstances. In such cases, investors are provided with the option of opting out from the fund and can retrieve the amount in a specific time window. A failure to opt out within the time window would attract on exit load.

If you are wondering what happens to the money paid as exit load, well it’s added to the fund for reinvestment. Earlier the money was used to fund activities like marketing operations but in 2012 SEBI mandated the money should be put back in the fund so it can be reinvested so it can benefit investors who are invested in the fund.

Remember, when you are looking for various options to invest the exit load should not be a big concern, however, when you plan on redeeming your investment from a mutual fund, you would need to plan it according to the exit load.