When investing in mutual funds, mostly investors focus on returns and tend to overlook one important aspect, i.e. costs associated with the investment. The reality is that certain costs — like expense ratio and exit load — can significantly impact overall returns in the long run. While expense ratio is an annual expense that investors are usually aware of, exit load is a charge that is levied when the investor withdraws money from the fund before the stipulated period and it can also quietly cut into profits. But before moving further, let’s understand the purpose behind levying exit load by mutual funds.
So, its purpose is to prevent investors from frequent entry-exit, so that the fund manager can get stable capital for a long time and they can invest with a better strategy. This maintains the liquidity of the fund and also protects the interests of other investors.
It is also worth noting that mutual fund houses keep changing the exit load structure as well as time periods for the levy on their schemes from time to time. Therefore, before investing, definitely check the latest factsheet or scheme information document (SID) of the scheme.
Also read: Best HDFC mutual fund: Rs 1,000 SIP now worth Rs 2.03 crore; Rs 1 lakh lump sum grew 195 times
Now, in this write-up, we will take a look at the top 10 equity mutual funds with the lowest exit loads. The most interesting thing is that the top 3 funds included in this list are from the same fund house – SBI Mutual Fund. One more thing to note here is that all these funds have been carefully selected based on the exit load charged by their respective fund houses for redemptions made within 30 days from the date of unit allotment.
1. SBI Flexicap Fund
2. SBI Large & Midcap Fund
3. SBI Consumption Opportunities Fund
In these three schemes, if you withdraw money within 30 days of investment, then you have to pay an exit load of only 0.10%. But after 30 days there is no exit load. That is, even if there is a need for withdrawal in a short period of time, the loss will be very minimal.
If we look at the returns of these three SBI funds, they have been consistent performers over the short and long-term. SBI Flexicap Fund – Direct Plan has generated 14.7% CAGR in 3 years, 21.38% in 5 years and 13.79% over 10 years. Likewise, SBI Large & Midcap Fund – Direct Plan has given 20.67% CAGR in 3 years, 26.96% in 5 years and 15.48% in 10 years. The third SBI fund, SBI Consumption Opportunities Fund – Direct Plan generated 19.73% CAGR in 3 years, 27.90% in 5 years and 17.11% in 10 years.
Also read: Top 5 SBI mutual funds with up to 30% annualised returns in 3 years
Apart from SBI’s 3 funds, following are 7 other funds with lowest exit load:
1. Tata Banking and Financial Services Fund (0.25%)
2. Tata Infrastructure Fund (0.25%)
3. Tata India Pharma & Healthcare Fund (0.25%)
4. Tata Resources & Energy Fund (0.25%)
5. Tata Digital India Fund (0.25%)
6. Tata India Consumer Fund (0.25%)
7. Nippon India Quant Fund (0.25%)
(Data: Value Research)
Note: For all 10 mutual funds, including the 3 SBI schemes, an exit load is applicable only if you redeem your investment within 30 days; after this period, there are no exit charges, making them ideal for investors with a slightly longer investment horizon.
There are charges other than exit load
As mentioned above, not only exit load, there are many other expenses in mutual funds which affect your returns. Such as the expense ratio, which is the annual management fee of the fund. Apart from this, some schemes may also have transaction fees, switching charges, or in some cases penalty charges.
Understand the overall fund, not just low cost
Investors must remember here that schemes with low exit loads can be beneficial for investment, but it would not be wise to choose a fund on this basis alone. You should also see the long term performance of that fund, the quality of the portfolio, the track record of the fund manager, and most importantly — whether that fund matches your investment goals and risk profile or not.
A smart investor is one who takes decisions keeping in mind every aspect—not just low cost, but overall quality.
