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Exit Load in Mutual Funds
An exit load in mutual funds is a charge taken as a penalty from an investor when units are redeemed before a pre-specified period. This charge serves to discourage premature redemptions and protect the interests of long-term investors. Let us look into the meaning of exit load in mutual funds, how it's calculated, its various purposes, and other key details to help you make informed investment decisions.
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- Exit Load in Mutual Funds
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Large Cap Equity Fund
AUM (Cr)
₹2,780
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 21.36 %
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Accelerator Mid-Cap Fund II
AUM (Cr)
₹5,888
Estimated Value
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After 5 years
Returns (p.a.)
+ 20.77 %
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Opportunities Fund
AUM (Cr)
₹38,561
Estimated Value
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After 5 years
Returns (p.a.)
+ 22.35 %
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Diversified Equity Fund
AUM (Cr)
₹3,683
Estimated Value
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After 5 years
Returns (p.a.)
+ 17.55 %
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Frontline Equity Fund
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₹4,489
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After 5 years
Returns (p.a.)
+ 20.48 %
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Grow Money Plus Fund
AUM (Cr)
₹454
Estimated Value
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After 5 years
Returns (p.a.)
+ 17.39 %
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Large Cap Equity Fund
AUM (Cr)
₹2,780
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 21.36 %
Diversified Equity Fund
AUM (Cr)
₹3,683
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 17.55 %
Frontline Equity Fund
AUM (Cr)
₹4,489
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 20.48 %
Grow Money Plus Fund
AUM (Cr)
₹454
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 17.39 %
Growth Super Fund
AUM (Cr)
₹13,662
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 16.87 %
Accelerator Mid-Cap Fund II
AUM (Cr)
₹5,888
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 20.77 %
Opportunities Fund
AUM (Cr)
₹38,561
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 22.35 %
Growth Opportunities Plus Fund
AUM (Cr)
₹1,025
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 19.82 %
Classic Opportunities Fund
AUM (Cr)
₹13,991
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 18.56 %
Opportunities Fund
AUM (Cr)
₹3,493
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 19.9 %
Equity Top 250 Fund
AUM (Cr)
₹557
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 16.83 %
Whole Life Income Fund
AUM (Cr)
₹849
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 6.03 %
Individual Preserver Pension Fund
AUM (Cr)
₹140
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 5.52 %
Whole Life Aggressive Growth Fund
AUM (Cr)
₹912
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 20.06 %
Save N Grow Money Fund
AUM (Cr)
₹65
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 10.61 %
Asset Allocation Fund II
AUM (Cr)
₹297
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 12.07 %
Multi Cap Balanced Fund
AUM (Cr)
₹2,027
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 12.65 %
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What is Exit Load in Mutual Funds?
An exit load in mutual funds is a percentage-based fee levied by an Asset Management Company (AMC) when an investor redeems their units from any mutual fund scheme before a pre-specified holding period. This charge is calculated on the Net Asset Value (NAV) of the units being redeemed. The NAV represents the per-unit value of the fund, derived by subtracting the fund's liabilities from its assets.
Here’s how exit load works in mutual funds:
When an exit load is applicable, the AMC deducts this percentage from the total NAV of the redeemed units—whether invested through a lump sum or SIP—and the remaining amount is credited to the investor's account.
- Insurance Companies
- Mutual Funds
| Returns | ||||
|---|---|---|---|---|
| Fund Name | 5 Years | 7 Years | 10 Years | |
| High Growth Fund Axis Max Life | 32.5% | 21.1% |
18.6%
View Plan
|
|
| Top 200 Fund Tata AIA Life | 30.5% | 21% |
18.2%
View Plan
|
|
| Accelerator Mid-Cap Fund II Bajaj Allianz | 20.77% | 12.18% |
13.48%
View Plan
|
|
| Opportunities Fund HDFC Life | 22.35% | 14.28% |
13.41%
View Plan
|
|
| Equity II Fund Canara HSBC Life | 16.54% | 9.58% |
9.52%
View Plan
|
|
| Grow Money Plus Fund Bharti AXA | 17.39% | 12.97% |
13.01%
View Plan
|
|
| Multiplier Birla Sun Life | 22.67% | 13.96% |
14.35%
View Plan
|
|
| Equity Top 250 Fund Edelwiess Life | 16.83% | 11.21% |
10.5%
View Plan
|
|
| Opportunities Fund ICICI Prudential Life | 19.9% | 12.78% |
11.61%
View Plan
|
|
| Balanced Fund LIC India | 10.4% | - |
-
View Plan
|
|
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| Returns | ||||
|---|---|---|---|---|
| Fund Name | 3 Years | 5 Years | 10 Years | |
| Active Fund QUANT | 23.92% | 31.48% |
21.87%
|
|
| Flexi Cap Fund PARAG PARIKH | 20.69% | 26.41% |
19.28%
|
|
| Large and Mid-Cap Fund EDELWEISS | 22.34% | 24.29% |
17.94%
|
|
| Equity Opportunities Fund KOTAK | 24.64% | 25.01% |
19.45%
|
|
| Large and Midcap Fund MIRAE ASSET | 19.74% | 24.32% |
22.50%
|
|
| Flexi Cap Fund PGIM INDIA | 14.75% | 23.39% |
-
|
|
| Flexi Cap Fund DSP | 18.41% | 22.33% |
16.91%
|
|
| Emerging Equities Fund CANARA ROBECO | 20.05% | 21.80% |
15.92%
|
|
| Focused fund SUNDARAM | 18.27% | 18.22% |
16.55%
|
|
Last updated: June 2025
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How to Calculate Exit Load in Mutual Funds
Exit load rates are not uniform across all mutual fund schemes. They vary depending on the type of mutual fund, its investment objective, and the AMC's policy.
Consider an investor who invested Rs. 30,000 in a mutual fund scheme in January 2025. The scheme's offer document states an exit load of 1% if units are redeemed before 1 year. At the time of investment, the NAV was Rs. 100, meaning the investor purchased 300 units (Rs. 30,000 / Rs. 100).
Now, if the investor decides to redeem their units after 4 months, in May 2025, an exit load will be applicable as they are redeeming within the one-year period. Let's assume the NAV at the time of redemption in May 2025 is Rs. 105. With the following exit load in a mutual fund example, let us try to understand its calculation:
| Initial Investment | Rs. 30,000 |
| Units Held | 300 |
| Redemption Period | 4 months |
| Exit Load Applicable | 1% |
| NAV at Redemption | Rs. 105 |
| Value of Units at Redemption (300 units* Rs. 105) | Rs. 31,500 |
| Exit Load Amount (1% of Rs. 31,500) | Rs. 315 |
| Net Amount Received by Investor | Rs. 31,185 |
What is the Purpose of Exit Load?
Frequent redemptions can lead to portfolio churn and potential disruption to the fund manager's investment strategy. Imposing an exit load helps prevent premature redemptions and encourages a long-term investment horizon among unitholders.
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Curb Short-Term Trading:
Exit loads act as a deterrent for investors looking to make quick profits through short-term trading in mutual funds. This promotes a more stable investor base.
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Maintaining Fund Stability:
Long-term investment plans benefit from stable asset bases and discourage premature withdrawals. Frequent redemptions can force fund managers to sell underlying assets prematurely, potentially at unfavorable prices, to meet liquidity demands. This can negatively impact the fund's performance for long-term investors. Exit loads help mitigate this.
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Covering Transaction Costs:
Redemption includes administrative and operating costs for AMC. While not directly stated, a portion of the exit load can indirectly help offset these expenses.
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Promoting Long-Term Investment Discipline:
By penalizing early exits, exit loads encourage investors to align their investment horizon with the fund's investment objective, which is typically geared towards long-term wealth creation.
It's important to note that not all mutual funds levy an exit load; it's a specific feature disclosed in the scheme's offer document. Generally, exit loads tend to be higher for shorter investment periods, gradually reducing or becoming zero as the investment tenure increases.
Implications for Investors
The presence of an exit load has different implications for various types of investors:
-
For Short-Term Investors: Directly impacts returns if redeemed early, making funds less suitable for short-term goals.
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For Long-Term Investors: Minimal to no impact as loads often waive after a certain period.
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Psychological "Lock-in": Can create anxiety or hesitation to exit, even if market conditions change.
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Deciding Factor: Exit load should not be the sole deciding factor. Consider fund objectives, performance, manager, and expense ratio.
Considerations for Investors
Before investing in any mutual fund, investors should take the following into account regarding exit loads:
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Seek Financial Advice: Consult a financial advisor if unsure about exit load implications for your plan.
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Match Time Horizon: Align your investment period with the fund's exit load. Choose low/no exit load funds if early redemption is possible.
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Diversify Portfolio: Spread investments across funds with varying exit load structures to manage risk and maintain flexibility.
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Understand Load-Free Windows: Be aware of any "load-free" redemption periods or conditions offered by the fund for flexibility.
-
Compare Across Funds: Don't view exit loads in isolation; compare with similar funds to find investor-friendly options.
Conclusion
Exit loads are designed to promote long-term investment discipline and maintain fund stability. By thoroughly understanding the concept of exit loads, carefully reviewing scheme documents, and aligning investment decisions with personal financial goals, investors can navigate the mutual fund market more effectively and make choices that contribute to their financial well-being.
FAQs
-
What is Exit Load in Mutual Funds?
It's a fee charged when you sell your mutual fund units before a specific time period. -
Why do mutual funds charge an Exit Load?
To discourage early withdrawals and encourage long-term investing. -
Does every mutual fund have an Exit Load?
No, not all mutual funds charge an Exit Load; it's specified in their document. -
How does Exit Load affect short-term investors?
It can significantly reduce their returns if they redeem early. -
Should Exit Load be the only factor when choosing a fund?
No, it's important, but consider other factors like performance and fund objectives too.
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
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