An exit load is quoted as a flat percentage - 1%, commonly, if units are redeemed within a year of purchase. It’s natural to read that as 1% of what was invested. That’s not what it is: the load is calculated on the redemption value - units redeemed multiplied by the NAV on the day of redemption - not on the purchase price.
Run the identical ₹50,000 investment, at the identical 1% load, through two different outcomes:
- NAV rises: ₹50,000 buys 1,000 units at a NAV of ₹50. The fund does well; NAV rises to ₹70. Redemption value: ₹70,000. Exit load at 1%: ₹700.
- NAV falls: the same ₹50,000, the same 1,000 units, the same 1% load - but the fund falls and NAV drops to ₹40. Redemption value: ₹40,000. Exit load at 1%: ₹400.
The Rupee Cost Moves With the Fund’s Performance
Same investment, same load percentage, same number of units - a ₹300 difference in the rupee cost of exiting, purely because the load is a percentage of current value, not of the original cheque. A load that looks small and fixed on paper actually moves with the fund’s own performance: the better a fund has done since purchase, the more, in absolute rupees, its exit load costs to leave early.
This is a detail worth knowing precisely because it runs against intuition. Investors comparing exit loads across funds often treat the percentage as the whole story, when the number it’s multiplied against - today’s NAV, not yesterday’s - is doing at least as much of the work.
Compute the load against today’s redemption value, not the original cheque. The percentage is the smaller half of the calculation - the number it multiplies is doing at least as much of the work, and it rises with the fund’s own success.
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