Load

A load is a fee charged by a Mutual Fund to investors, typically as a percentage of the investment amount. Historically, there were two types: entry load (charged when buying units) and exit load (charged when selling/redeeming units). SEBI abolished entry loads on mutual funds in August 2009, so today only exit loads remain relevant in India.

Exit loads are designed to discourage short-term redemptions and protect long-term investors from the costs of frequent churn. A typical equity mutual fund charges an exit load of 1% if units are redeemed within 12 months of purchase. After 12 months, redemption is usually free. Liquid funds might charge a graded exit load for redemptions within 7 days, and some ELSS (tax-saving) funds have a mandatory 3-year lock-in with no exit load after that period.

The exit load is deducted from the NAV at the time of redemption. For example, if a fund's NAV is ₹50 and the exit load is 1%, you receive ₹49.50 per unit. On a ₹5,00,000 redemption, a 1% exit load costs you ₹5,000. SEBI mandates that exit load amounts collected by the fund be credited back to the scheme (not the AMC), benefiting remaining unitholders.

Different fund categories have different exit load structures. Overnight funds and some liquid funds have zero exit load. Equity funds typically charge 1% for redemptions within 12 months. Solution-oriented funds (retirement, children's education) may have 5-year lock-in periods. Always check the Scheme Information Document (SID) for the specific exit load schedule.

When comparing mutual funds, exit load should factor into your total cost analysis alongside the expense ratio. For short-term investments (under 12 months), the exit load effectively increases your cost by 1%, which can significantly eat into returns on a short-term equity allocation.