What does exit load mean and how to calculate it for mutual fund investments?

Exit loads are minor penalties imposed by the AMCs to discourage premature redemption of mutual funds.

An exit load is calculated on the Net Asset Value (NAV) for each investment or SIP as per the exit load mentioned in the factsheet for the particular month when the fund has been purchased. To learn more about the factsheet, visit zerodha.com/varsity/chapter/the-mutual-fund-fact-sheet.

Example scenario

1. An investment of ₹50,000 is made in a mutual fund with an exit load of 1% and a NAV of ₹50. Therefore, the client would have received 1000 units for their investment.
2. The client decides to redeem 1000 units of the mutual fund when the NAV is ₹60.
3. The exit load of 1% will be deducted from the latest NAV, i.e. ₹60. The calculation will be as follows: (1% of ₹60) * 1000 units = ₹600. The redeemable amount would be ₹59,400 (₹60,000 - ₹600).