What Are Entry Load And Exit Load? And How To Calculate Them
What is Entry Load?
Entry load is the fee charged by a mutual fund when you purchase units in the fund. The fee is typically a percentage of the amount that you’re investing. For example, if you’re investing $1,000 and the entry load is 2%, you would be charged $20.
What is Exit Load?
An exit load is a fee charged by a mutual fund when an investor redeems or sells, shares of the fund. The load is generally expressed as a percentage of the redemption amount. For example, an exit load of 1% on a $10,000 redemption would result in a fee of $100.
Exit loads are designed to discourage short-term trading in mutual funds. By charging a fee on redemptions, investors are less likely to redeem their shares immediately after experiencing a strong performance. This helps to keep the assets of the fund invested for the long term, which is in the best interest of all shareholders.