Indian Mutual Fund investors have got some respite from entry and exit loads in certain situations. The Securities and Exchange Board of India (SEBI) – the stock market regulator – and Association of Mutual Funds of India (AMFI) have ruled in a case that entry and exit loads should not be charged for mutual fund units that have been given as bonus or against reinvested dividends.
An individual investor, Gokhale, had filed a case three years ago that led to this ruling today.
Prior to this, many mutual fund houses were charging entry loads for units that we granted by them as bonus or when an investor decided to reinvest dividends in the same fund. Some of them also charged exit loads when you redeem any of these units. This is a major victory for individual investors who were losing 2% each way for no reason.
Recently SEBI and AMFI have also proposed that no charges should be levied for investments made directly to the fund houses without using any intermediary agents. That is, when the fund house has not incurred any selling expense (the investor came to them directly) there should be no entry loads in such transactions. When this becomes the rule, along with this latest ruling, mutual funds will become cheaper or put in another way, your returns just went up by 1 or 2%.