Definition of Exit Load

Whenever an investor makes an exit from a mutual fund within a duration as set by the mutual fund scheme, they may need to pay a charge known as the exit load.

Most mutual fund schemes charge a fee while entering or leaving a scheme known as load. The one levied while leaving is called exit load. This fee is collected with the aim of discouraging investors from leaving a scheme. In other words, it is done to avoid withdrawals.

Points to remember:

• The exit is levied to discourage investors from changing schemes often.
• It is calculated as a percentage of the Net Asset Value (NAV) when the investor is selling off the schemes.
• Exit load is not applicable in case of merger of funds.

Example:
Suppose, you are selling 500 units of an equity scheme that you had purchased four months ago. The scheme could charge you 1 percent for an exit load if you redeem the units you hold before one year.

Let us assume the NAV is Rs. 100. You will get Rs. 99 per unit [Rs 100 – Rs 1 (1 per cent of 100)] on redemption. The total amount that you’ll get will be Rs. 49,500 (Rs 99 X 500 units). That means you have paid an exit load of Rs. 500 (Rs 1 per unit).