What is mutual fund load?

Mutual fund load refers to the sales charge or commission charged by the Asset Management Company (AMC) when investors sell mutual fund units. It can affect the overall returns on mutual fund investments. Moreover, it’s important to note that the expense ratio of the fund does not include mutual fund load, meaning it is levied separately by the AMC subject to conditions.

Types of mutual fund load

Mutual fund load, by definition, is a charge incurred by the investor, thereby affecting the overall cost structure and returns on investment. Two primary types of mutual fund load are:

1. Entry load (aka front-end load): It is a fee charged when investors purchase mutual fund units. It is calculated as a percentage of the total amount invested. However, in 2009, the Securities and Exchange Board of India (SEBI) banned AMCs from charging an entry load on mutual fund investments to protect investors from high sales commissions and promote transparency in mutual fund transactions.
2. Exit Load (aka Back-end load): It is a fee charged when investors redeem or sell their mutual fund units. It is calculated based on the net asset value (NAV) of the shares being redeemed and is deducted from the redemption amount.

Load vs. no-load mutual fund: What's the difference?

Load and no-load mutual funds differ primarily in how they charge fees to investors. A load fund imposes sales charges either when you buy (front-end load), sell (back-end load), or periodically (level-load). These fees compensate financial advisors or brokers for their services. In contrast, no-load funds do not charge these sales fees, allowing investors to allocate their entire investment amount to the fund. While load funds may offer advice and guidance, no-load funds provide a cost-effective option for investors who prefer managing their investments independently, without upfront or backend fees impacting their initial or eventual returns.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.