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Assume I invest Rs.1000 on the 1st of January in a mutual fund that charges an exit load of 1% for redemption within 1 year. After 6 months I invest Rs.500 more in the same fund.

  1. Now how much would the exit load be if I opt to redeem in November?
  2. How much would the exit load be if I opt to redeem in February of the next year?

Assume that the NAV remains constant.

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Surely there is a prospectus for the mutual fund that you have agreed that you have read and understood before investing, and this prospectus spells out the details? If not, you should ask the broker selling you the fund. As of now, this question is too localized to be answerable directly since the answer may well depend on the mutual fund and/or applicable law regarding exit fees. – Dilip Sarwate Dec 25 '12 at 23:46
The prospectus only spells out the applicable exit load but does not clarify the SIP case. It's localized to India (hence the tag), but applicable to all mutual funds that have exit loads. – Dheeraj V.S. Dec 26 '12 at 4:31
I still think this question is too localized, and not just to India, but to the specific (unidentified) mutual fund. In the US, for example, some but not all load mutual funds waive the sales charge (load) for regular investments made through 401k plans, IRAs and the like. Similarly, some but not all mutual funds that charge exit fees waive them if a re-investment of a dividend/capital gains distribution is withdrawn within x days, or if the redemption is required to meet a Required Minimum Distribution (RMD). So, why not ask your mutual fund as to what its policy is re the SIP case? – Dilip Sarwate Dec 27 '12 at 0:03

Now how much would the exit load be if I opt to redeem in November?

At constant NAV, you would pay 1% of (1000+500) = Rs. 15. You'll get back Rs. 1485 (minus STT of 0.25% if this is an equity fund, which is around Rs. 3.7)

How much would the exit load be if I opt to redeem in February of the next year?

The first investment is okay since it's past the 1 year mark. So you'll pay only 1% of Rs. 500 = Rs. 5. (And you'll still pay STT on the whole amount, for equity funds)

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The example you have give is not of SIP. It is of 2 investments in the same fund. Each of this is treated seperately and one year applies to it individually.

The same is true for SIP as well ... each of the investments is treated seperate and the one year applies to each of the monthly investments.

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protected by Chris W. Rea Apr 15 at 17:04

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