Exit Load in Mutual Funds

An exit load is a fee imposed by a mutual fund company when an investor redeems their units before a specified period. It is calculated as a percentage of the redemption amount. For example, if an investor redeems units worth Rs. 10,000 and the exit load is 1%, Rs. 100 will be deducted as the exit load, and the investor will receive Rs. 9,900 as the redemption proceeds.
EXPLORE FUNDS
What is Exit Load in Mutual Fund
EXPLORE FUNDS
3 mins read
10-January-2025

An exit load is a fee imposed by a mutual fund company when an investor redeems their units before a specified period. It is calculated as a percentage of the redemption amount. For example, if an investor redeems units worth ₹10,000 and the exit load is 1%, Rs. 100 will be deducted as the exit load, and the investor will receive Rs. 9,900 as the redemption proceeds.

In this blog, you will learn about the meaning of exit load, the different types of exit loads in mutual funds, how to calculate exit load, and why mutual funds levy this fee. Additionally, we will explore when exit load is applicable, considerations for investors, and much more.

What is an exit load in mutual funds?

Exit load in mutual funds refers to a fee levied by Asset Management Companies (AMCs) when investors redeem their mutual fund units before a specified period. It acts as a deterrent against premature withdrawals and aims to discourage investors from frequent trading, promoting stability within the fund. The exit load is deducted from the Net Asset Value (NAV) of the mutual fund, reducing the overall returns for investors.

Exit loads vary among mutual fund schemes and are typically higher for shorter investment durations. For instance, if an investor redeems their units within a year of purchase, they may incur a higher exit load compared to redeeming after a longer holding period.

Understanding exit loads is essential for investors as it helps them consider the potential costs associated with early withdrawals. By aligning investment goals with the appropriate holding period, investors can mitigate the impact of exit loads on their returns and make informed decisions regarding their mutual fund investments.

What is the purpose of exit load?

Exit loads serve two primary purposes:

  1. Discouraging frequent trading: Exit loads are designed to deter investors from engaging in frequent buying and selling of mutual fund units. Such frequent trading can disrupt the fund manager's ability to effectively manage the fund's portfolio and potentially impact overall performance.
  2. Protecting long-term investors: By imposing a fee for early redemptions, exit loads encourage investors to maintain their investments for the long term. This benefits both the fund and other long-term investors by promoting stability and consistent performance.

Types of exit load in mutual fund

Contingent Deferred Sales Charge (CDSC)

Under the CDSC structure, the exit load decreases over time. Initially, the charges are higher, but they gradually decrease as the investor holds the units for a longer duration. If the investor holds the units beyond the CDSC period, no exit load is applied upon redemption.

Fixed Exit Load

In this type of exit load, the charges remain constant throughout the specified holding period. For instance, if a mutual fund has a fixed exit load of 2%, it will apply whether the investor redeems the units within one month or within one year of purchase.

Stepped Exit Load

Stepped exit load involves a graduated structure where the exit load percentage changes in steps over the holding period. The longer the investor holds the units, the lower the exit load percentage becomes. This structure intends to incentivize long-term investment by reducing the penalty for early redemption over time.

Top performing funds

Equity

Debt

Hybrid

Tax saver

View All
View all
cross

Search Mutual Funds & Add to Compare

search

Frequently asked questions

What is the best exit load for a mutual fund?

The best exit load for a mutual fund is one that is low or non-existent. The exit load is a fee charged by mutual funds when an investor sells or redeems their units before a certain period of time has elapsed. It is usually a percentage of the Net Asset Value (NAV) of the mutual fund units held by investors.

What is exit load in mutual fund with no lock in period?

Exit load in mutual funds with no lock-in period refers to the fee that the Asset Management Companies (AMCs) charge investors at the time of exiting or redeeming their fund units. It is also referred to as the commission to fund houses or exit penalty if an investor exits the fund in the lock-in period. Not all funds levy an exit charge, hence while choosing a plan, do consider the exit load too, along with its expense ratio.

What is 1% exit load in mutual fund?

1% exit load in mutual funds refers to a fee charged by mutual funds when an investor sells or redeems their units before a certain period of time has elapsed. The exit fee is usually a percentage of the Net Asset Value (NAV) of the mutual fund units held by investors.

Which mutual fund has 0 exit load?

There are several mutual funds that have zero exit loads. Investors are suggested to do research before investing their hard earned money.

Will I have to pay mutual fund exit load, even if I am selling at a loss?

Yes, you will have to pay an exit load even if you are selling at a loss when selling mutual fund units.

Is exit load applicable after 1 year?

Yes, exit load may still apply after 1 year depending on the mutual fund scheme's terms and conditions. Exit loads are typically imposed to discourage premature withdrawals and promote long-term investments. Some mutual funds may continue to charge exit loads even after 1 year to maintain stability within the fund.

Why is the exit load charged?

Exit loads are charged to discourage frequent trading and premature withdrawals by investors. This fee helps maintain the stability of the mutual fund and aligns investors' interests with long-term investment objectives. Additionally, exit loads contribute to reducing transaction costs and potential disruptions within the fund.

What is the exit load in SIP?

The exit load in SIP (Systematic Investment Plan) refers to the fee charged upon redeeming SIP investments prematurely. The exit load amount varies depending on the mutual fund scheme and the duration of the investment. It is crucial for investors to be aware of the exit load conditions before investing in SIPs.

How do you avoid exit load in mutual funds?

Investors can avoid exit loads by adhering to the specified holding period mentioned in the mutual fund scheme. Choosing funds with shorter lock-in periods or no exit loads can also help avoid these charges. Additionally, investors should carefully read the scheme's offer document to understand the exit load conditions and plan their investments accordingly.

What is a good exit load for a mutual fund?

A good exit load for a mutual fund typically ranges from 0% to 1%. It is charged if units are sold before a specified period, often one year. Lower exit loads are preferred as they reduce the cost of exiting the investment early.

How to avoid exit load in SIP?

To avoid exit load in a Systematic Investment Plan (SIP), hold each installment for the duration specified by the fund. For instance, if the exit load applies for one year, ensure each SIP installment is held for at least one year before redeeming.

Do low duration funds have exit load?

Low duration funds can have exit loads, but they are generally lower or absent compared to long-term funds. The specific exit load depends on the fund’s policy and is typically designed to discourage short-term trading.

How to calculate exit load?

Exit load is calculated as a percentage of the redeemed amount. For example, if the exit load is 1% and you redeem Rs. 10,000, the exit load charged will be Rs. 100. The formula is: Exit Load = (Redeemed Amount) * (Exit Load Percentage).

Show More Show Less

Related Videos

Bajaj Finserv app for all your financial needs and goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

  • Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
  • Invest in fixed deposits and mutual funds on the app.
  • Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
  • Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
  • Apply for Insta EMI Card and get a pre-approved limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.
  • Shop from over 100+ brand partners that offer a diverse range of products and services.
  • Use specialised tools like EMI calculators, SIP Calculators
  • Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

GET THE APP

Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.

Disclaimer:

Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319

BFL does NOT:

(i) provide investment advisory services in any manner or form:

(ii) carry customized/personalized suitability assessment:

(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.

In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.

Disclaimer on Risk-O-Meter:

Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.


Disclosure: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.