Entry and Exit Load

by Manshu on May 6, 2008

in IPO/NFO

The terms entry and exit load refer to mutual funds. They refer to the fact that you will be charged fees when you invest in mutual funds. These fees are to offset the overhead costs of the companies you work with to obtain such investments. The fees are generally a percentage of the amount you invest in the mutual funds. Therefore it is important to understand how much these fees will be before you commit to such investments.

The company has the choice to either charge you these fees when you purchase the mutual funds or when you decide to sell them. Should they decide to charge the fees when you buy the mutual funds then the transaction is an entry load. If they choose to charge you for the fees when you sell the mutual funds then the transaction is an exit load.

It is important to understand that entry load fees aren’t refundable. So even if you end up losing money on the investment you won’t get those fees returned to you. Most companies go with the entry load though as that way they can collect their fees early in the game. They don’t have to worry that the investor won’t be able to pay them if they wait to go with an exit load.

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