When investors redeem or depart their fund units, asset management companies (AMCs) charge them a fee known as an exit load. If an investor withdraws money from the fund within the lock-in period, it is also known as the exit penalty or commission to fund houses.

Not all mutual funds impose an exit fee. As a result, in addition to the plan's expenditure ratio, take the exit burden into account while making your decision. It's important to remember that the exit load is not included in the expense ratio. With open-ended funds, investors can withdraw their money from the programme whenever they wish. Investors may fail to commit to a fund for the time period they have promised to invest for. As a result, an exit load deters investors from withdrawing money from a fund too soon.

How to Calculate Exit Load in Mutual Funds

Most of the time, the fund manager decides on the exit load. Let's say a person contributed Rs. 10,000 to a mutual fund programme in January 2018. The scheme's NAV is Rs. 100, and there is a 1% exit fee for early redemption. The investor decided to invest Rs. 6,000 at NAV of Rs. 100 in the same fund in March 2018. When the NAV reaches Rs. 110 in November 2018 and he redeems the fund, how would you determine the exit fee? If the redemption occurs in February 2019, and the NAV is Rs. 115, how can you determine the exit fee? It is fairly easy, as demonstrated below:

According to the current NAV of Rs. 110 in November, an exit load of would be applied for both investments made in January 2018 and March 2018 for redemption in November 2018.