An exit load refers to the fee that the Asset Management Companies (AMCs) charge investors at the time of exiting or redeeming their fund units. An Exit load is calculated for each SIP or Investment when the fund has been purchased and as per the exit load mentioned in the factsheet for the month or in the SID of the scheme on the AMC website.
The Exit Load of a Mutual Fund is calculated on the applicable NAV of the transaction.
Here is an example to understand Exit loads better:
Let’s assume you have made an investment for Rs.3000 in an ABC Mutual fund on 1st April 2020, NAV is 30 and the exit load as per the factsheet of the fund is 1%.
Therefore, you would have received 100 units for your investment.
On 1st June 2020, you want to redeem the Mutual fund and place a redemption order. The NAV of your Mutual fund is now Rs.50.
How is the 1% exit load deducted?
The 1% Exit Load is deducted from the latest NAV (the NAV of the day you are redeeming the Mutual fund). If the NAV is Rs.50 at the time of redemption, then, the calculation is:
1% of Rs.50 = Rs.0.5 multiplied by the number of units will be deducted from the redemption amount as Exit Load.
0.5 (Exit Load per unit) * 100 (Total number of units redeemed) = Rs.50 (Exit Load Amount)
Your investment is Rs.5000 - Rs.50 = Rs.4950 (Redeemable amount).
This is how the Exit Load is calculated.