Recently, many of the Asset Management Companies increased the exit load on redemption of units for tenures ranging from 1 to 3 years. The fund houses which increased the exit loads include the big ones like UTI Mutual Fund, Axis Mutual Fund, HDFC Mutual Fund and Birla Sun Life. The increase in exit load has been in the range of 0.5% to 2% and has been spread across equity as well as debt schemes and even balanced funds.
The regular large scale churning of portfolios is any fund manager’s headache. Some estimate that AMCs have lost 10 to 15 million folios over the last 5 years. By this increased exit load, the fund houses are obviously trying to deter short-term investors.
Will this new development benefit you?
The answer depends on the schemes you wish to invest. If you plan to invest in a diversified scheme, it is always better to stay invested for a long time. However, if your choice is a sector fund, the increased exit load might not help you. The performance of many sectors are cyclical and perform exceptionally well during certain periods. So, it makes sense for many investors to move out of sector funds once it has performed well. But with the increased exit loads, you might think twice before exiting a sector fund.
The regular large scale churning of portfolios is any fund manager’s headache. Some estimate that AMCs have lost 10 to 15 million folios over the last 5 years. By this increased exit load, the fund houses are obviously trying to deter short-term investors.
Will this new development benefit you?
The answer depends on the schemes you wish to invest. If you plan to invest in a diversified scheme, it is always better to stay invested for a long time. However, if your choice is a sector fund, the increased exit load might not help you. The performance of many sectors are cyclical and perform exceptionally well during certain periods. So, it makes sense for many investors to move out of sector funds once it has performed well. But with the increased exit loads, you might think twice before exiting a sector fund.
Click here to read the entire report: http://www.business-standard.com/article/pf/exit-load-is-good-for-investors-114100900960_1.html
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