Returns matter—but so do the costs you pay to earn them.

When you invest in mutual funds, it’s easy to focus on past returns, star ratings, and fund categories.

But a crucial factor many investors overlook is the load structure—the entry and exit fees you may be charged when buying or selling units.

These charges may seem small, but over time, they can impact your net returns significantly, especially for short- to medium-term investments.

Let’s break down the different types of mutual fund loads, when they apply, and how to choose funds that match your investment horizon and cost sensitivity.

1. What Is a “Load” in Mutual Funds?

A load is a type of fee charged by a mutual fund when you enter (buy) or exit (sell) your investment.

These fees are meant to:

• Cover distribution costs

• Discourage early exits

• Align investor behavior with long-term goals

2. Types of Load Structures in Mutual Funds

Let’s walk through the common ones:

A. Entry Load 🚫 (Now Abolished)

• A fee charged at the time of investment (used to be around 2–2.5%)

• SEBI abolished entry loads in 2009 to make mutual fund investing more transparent and investor-friendly

✅ Today: Entry Load = 0%

B. Exit Load ✅ (Still Applicable)

This is the most common charge investors face. It's a fee charged if you redeem your investment within a specific period, usually 1 year.

🧠 Pro Tip: Always check the exit load window in the fund’s factsheet before investing.

C. SWP Exit Loads

If you’re doing a Systematic Withdrawal Plan, and withdrawing units invested less than 1 year ago, exit loads will apply to those specific units.

Plan your withdrawals to avoid unnecessary charges.

3. Why Do Exit Loads Exist?

✅ To promote long-term investing

✅ To discourage speculative or premature exits

✅ To protect long-term investors in funds with limited liquidity

✅ To reduce portfolio churn and associated transaction costs

4. Load vs Expense Ratio: Know the Difference

5. Load-Free Fund Options

💡 Many mutual funds, especially index funds, liquid funds, and some direct plans, have zero exit load if held for more than a few days.

Also:

• Direct mutual funds (vs regular plans) have lower expense ratios

• No distributor commissions = More of your money stays invested

6. How to Minimize or Avoid Loads

🔎 Hold equity funds for at least 1 year to bypass exit loads

🔄 Avoid switching funds too frequently—review annually, not monthly

💡 Use direct plans when possible to save on ongoing costs

📋 Read the fund factsheet carefully—the load structure is always disclosed

TL;DR — Too Long; Didn’t Read

• Load structures are entry and exit charges applied to mutual fund transactions

• Entry load is no longer applicable

• Exit load (typically 1%) applies if you sell equity fund units within 12 months

• Some debt and hybrid funds may have smaller exit loads

• SWPs may trigger exit loads on newer units

• To minimize impact: stay invested long-term, use direct plans, and read the factsheet

📩 Not sure if your current investments carry hidden exit loads? Let’s review your mutual fund choices and optimize your portfolio for cost-efficiency and compounding.