Exit Load

Exit Load is a fee charged by a mutual fund or investment scheme when an investor redeems or exits from the scheme before a specified period.

It is designed to discourage short-term trading and speculative behaviour, and to protect long-term investors from the costs associated with frequent inflows and outflows. Exit load is deducted from the redemption amount before it is credited to the investor's account. What is an Exit Load? If a mutual fund has an exit load of 1% for redemptions within 1 year, and you redeem ₹1 lakh units within 10 months of purchase, the exit load would be ₹1,000 (1% of ₹1 lakh), and you would receive ₹99,000. Exit loads typically range from 0.25% to 2% depending on the fund type and holding period. Equity funds commonly have a 1% exit load if redeemed within 1 year; debt funds may have exit loads based on the duration of holding. The exit load period is calculated from the date of each purchase transaction. For a Systematic Investment Plan (SIP), each installment is treated separately — the first SIP installment has its own exit load clock starting from that installment's date, separate from subsequent installments. This means if an equity fund has a 1-year exit load, your first SIP installment becomes exit-load-free after 1 year, your second SIP installment after 1 year from that date, and so on. Exit load revenue is typically retained by the mutual fund and added to the scheme's assets, which indirectly benefits remaining investors by growing the fund's AUM. This is fair because managing sudden large redemptions imposes costs on the fund — the fund may have to sell securities at unfavourable prices to meet redemption requests. Some fund categories have no exit load. Liquid funds and overnight funds have no exit load because their underlying securities mature within 91 days and can be easily liquidated without cost. Arbitrage funds also typically have no exit load. Ultra Short Duration and Low Duration funds may have exit loads of 0.25% to 0.5% for redemptions within 3 to 6 months. Before investing in any scheme, always check the exit load terms. If you anticipate needing liquidity within 1 year, avoid equity funds and opt for liquid funds, which have no exit load and T+1 settlement. Exit load is a real cost to the investor, and frequent switching between funds can erode returns significantly — a 1% exit load every year on ₹10 lakhs amounts to ₹10,000 per year in pure cost, which would need to be earned back by any new investment.