Demystifying Exit Load in Mutual Funds:
A Friendly Guide for Investors
by Rajeev Pathak
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Forget dry jargon, let's crack
the code of exit loads in mutual funds! Imagine it as a gatekeeper fee charged
when you leave a party early. Not all parties have it, and the "entry
ticket" (investment) has the details. Read on for a crystal-clear
breakdown:
Why the gatekeeper?
·
Discourage
party crashers: Short-term investors who flit in and out can disrupt the
long-term party vibe. Exit loads keep them at bay, protecting the
steady rhythm of fund growth.
·
Compensate
for spilled punch: Early exits can cost the fund, like replacing
chairs they broke. Exit loads help recoup some of that cost.
How much is the fee?
·
It's
a percentage deducted from your redemption amount. Think of it
as a final "thank you" to the party host but with a little
deduction for early departure.
·
Not all
parties have it! Check the invitation (fund document) to see if there's an
exit load fee and for how long it applies.
How the Fee is calculated?
·
Multiply
the percentage by the number of "party tokens" (units) you're
cashing in.
·
Then
multiply that number by the "party ticket price" (NAV) at the
time.
·
Voila! That's
how much the gatekeeper takes.
Any tips for savvy partygoers?
·
SIPs
count too! Each installment is a separate ticket, so pay attention to
their exit load terms.
·
Different
party styles, and different gatekeeper rules: Debt funds (like the chill
lounge) might have lower fees than the high-energy equity
party. Hybrids? It depends on how early you leave the dance floor.
·
Always
RSVP wisely! Read the fund document before committing. Knowing the
exit load helps budget for the final bill.
In a nutshell:
Exit loads are
part of the game, but understanding them gives you the upper hand. Choose your
party wisely, read the fine print, and enjoy the long-term gains!
Contact: boirajeev@gmail.com
Great initiative.
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