{"id":6479,"date":"2022-03-03T21:22:51","date_gmt":"2022-03-03T15:52:51","guid":{"rendered":"https:\/\/aayushbhaskar.com\/?p=6479"},"modified":"2022-03-03T21:22:51","modified_gmt":"2022-03-03T15:52:51","slug":"how-to-lower-or-get-rid-of-exit-loads-in-mutual-funds","status":"publish","type":"post","link":"https:\/\/aayushbhaskar.com\/how-to-lower-or-get-rid-of-exit-loads-in-mutual-funds\/","title":{"rendered":"How to Lower or Get Rid of Exit Loads in Mutual Funds?","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"
Mutual funds are a great way for beginners to start investing, but did you know that many mutual fund companies have exit loads that can eat away at your gains?<\/span><\/p>\n “Exit load” is a slightly misleading term. It is not the amount you lose if you exit, but the amount you lose if you\u00a0<\/span>exit<\/span><\/em><\/strong>\u00a0<\/span>prematurely<\/span><\/em><\/strong>.<\/span><\/p>\n It is important that as an investor you know how to reduce exit load in mutual funds because this will help you save on costs and make more money from your investments.<\/span><\/p>\n In this post, we will discuss how to reduce the exit load in mutual funds so you can make better investment decisions.<\/span><\/p>\n But first, let us understand what exit load is, why is it charged, how is it different from the expense ratio, and finally, how to get rid of it.<\/span><\/p>\n Exit loads are deductions that you incur when you redeem mutual funds. <\/span><\/p>\n Mutual fund companies deduct the exit load from the value of your investment<\/a> and then give you the balance. Most mutual funds have an exit load, but some do not.<\/span><\/p>\n For example, if you have a Rs 1 lakh equity mutual fund investment, and the fund company charges a one percent exit load, you will receive Rs 99,000 on redemption.<\/span><\/p>\n The concept of exit load in SIPs perplex most investors. Let me help you understand it better.\u00a0<\/span><\/p>\n Investors believe that if they began an SIP a year ago, they will not be charged a load if they sell the investment within the time frame specified. However, many investors get it wrong.\u00a0<\/span><\/p>\n The exit load on SIP is the same as it is for all other mutual funds. The lock-in period must be completed for\u00a0<\/span>each SIP installment<\/span><\/em><\/strong> to avoid the exit load.<\/span><\/p>\n For Example: If you have been investing for three years, i.e., 36months. If there is a one-year lock-in period, you will be able to redeem your SIP on the 48th month without incurring Exit Load.<\/span><\/p>\n The main reason is to discourage investors from withdrawing their money frequently. Mutual funds invest in stocks<\/a> and bonds of companies. The fund manager has to sell off his investment when you withdraw your money and give you the cash instead. <\/span><\/p>\n This can lead to higher losses for other investors in the same mutual fund. Hence, AMCs charge a small fee when you withdraw your money.\u00a0\u00a0<\/span><\/p>\n Mutual funds charge an exit load for withdrawing money from the fund before a specified lock-in period.<\/span><\/p>\n This is to discourage investors from exiting the fund prematurely and to ensure that the fund manager has sufficient funds at his disposal to manage the mutual fund schemes.<\/span><\/p>\nWhat is Exit Load?<\/span><\/h2>\n
Exit Load on SIP<\/span><\/h2>\n
Why Exit Load is Charged?<\/span><\/h2>\n
How is Exit Load different from Expense Ratio?<\/span><\/h2>\n