Entry load, exit load and what you actually pay

Q: Entry load on mutual funds in India is:

Nil, banned by SEBI. SEBI banned entry load, so you buy at NAV with nothing added.

Q: An exit load is charged when you:

Sell within a set period. Exit loads apply to early redemption, to discourage very short holding.

Q: An exit load is deducted from:

The redemption value, before you are paid. It comes out of the redemption amount, so you receive less.

Q: Even with no load, long-run returns are reduced by:

The expense ratio. The yearly expense ratio is an ongoing drag on returns, load or not.

Q: An investor redeems units worth ₹80,000 with a 1% exit load. The amount received (before tax) is:

₹79,200. A 1% exit load on ₹80,000 is ₹800, deducted from the redemption value, so ₹79,200 is paid out.

What you pay to get in and out

No entry load, watch the exit

Getting in costs nothing extra, but getting out early can. This short lesson closes the pricing module: buy at NAV, mind the exit load, and never forget the quiet yearly cost.

1
There is no entry load in India, so you buy units at NAV, with nothing added on top.
2
Some funds charge an exit load if you sell within a set period, which reduces what you get back.
3
The exit load is a percentage of the redemption value, deducted before you are paid.
4
So the purchase price is simply the NAV, and the redemption price is the NAV minus any exit load.
5
Beyond loads, the yearly expense ratio quietly reduces returns over the long run.

Rupee example

A 1% exit load on redeeming ₹50,000 within a year takes ₹500, so you receive ₹49,500 before tax.

Practice

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Real exam format. Answer by voice, tap, or press 1 to 4. No negative marking, so always attempt.

Entry load on mutual funds in India is:

SEBI banned entry load, so you buy at NAV with nothing added.

Fixed entry loads are old, pre-ban distractors.

An exit load is charged when you:

Exit loads apply to early redemption, to discourage very short holding.

Buying carries no load; long holding usually avoids it.

An exit load is deducted from:

It comes out of the redemption amount, so you receive less.

It is not taken from your bank or future returns directly.

Even with no load, long-run returns are reduced by:

The yearly expense ratio is an ongoing drag on returns, load or not.

NAV and benchmark are not costs.

An investor redeems units worth ₹80,000 with a 1% exit load. The amount received (before tax) is:

A 1% exit load on ₹80,000 is ₹800, deducted from the redemption value, so ₹79,200 is paid out.

The load reduces, not increases, the payout, and 1% of 80,000 is 800, not 8,000.

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NISM V-A syllabus

1 The investment landscape

2 What a mutual fund really is

3 How a fund is built

4 Who watches over it

5 The offer document, decoded

6 Getting funds to investors

7 Selling the right way

9 NAV, loads and the daily price

10 Types of schemes, and picking one

11 Return, risk and performance

12 How gains are taxed

13 Serving the investor

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What you pay to get in and out

Practice

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NISM V-A syllabus

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