What Are Entry Load And Exit Load? And How To Calculate Them
When it comes to investing in mutual funds, there are a lot of different terms and concepts that you need to be familiar with. Two of these terms are entry load and exit load. In this blog post, we’ll explain what these terms mean and how you can 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.
Mutual funds that charge exit loads generally have lower expense ratios than those that don’t. For example, if two mutual funds have identical expense ratios but one charges an exit load while the other doesn’t, the fund with the load will have a lower net expense ratio.
While exit loads can be beneficial to shareholders and help to keep expenses low, they can also be costly if you need to sell your shares before the end of the specified holding period. Be sure to check whether a fund has an exit load before investing, and consider how long you’re willing to hold your shares.
Now, that you have understood “what is Entry and Exit load in Mutual funds” try to calculate entry and exit load
Entry Load and Exit Load Calculation in Mutual Funds?
To calculate the Entry Load, simply multiply the investment amount by the Entry Load percentage. For example, if you are investing $10,000 in a fund with a 5% Entry Load, your Entry Load will be $500.
Exit Load calculation in mutual funds
To calculate the Exit Load, simply multiply the investment amount by the Exit Load percentage. For example, if you are redeeming $10,000 from a fund with a 2% Exit Load, your Exit Load will be $200.
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