Tip of the day - How to avoid entry load on Mutual fund applications

Market regulator, Securities and Exchange Board of India (SEBI) has waived entry load for direct applications for mutual fund Investments. Market regulator said that the exemption would apply for investments in existing schemes with affect from Jan. 4, 2008 and in new scheme to be launched thereafter.

The Mutual funds generally charge about entry load of 2.25 % on investments made directly or through distributors. But with the introduction of this norm, an investor will not have to pay the entry load of 2.25% for equity funds unless he avails the services of a distributor. Units will be allotted to the investor to the full amount.

For Example: Earlier if an investor invests Rs. 1,00,000 in Mutual Fund entry load (Assuming @ 2.25%) 2,250 will be charged to him. Investor will be allotted only to the extent of Rs. 97,750 From Jan 4, 2008 if he invests in MF directly through AMC/Investor Service Centre he will be allotted units for the entire amount i.e., for 1,00,000

Frequently asked questions:

1. What do you mean by Direct application?

Ans: Direct application means the applications which are received through the Internet, directly submitted to AMCs’ or to the collection centre/investor services centers that are not routed through any distributor, agent or broker.On the application it has to be mentioned clearly as "Direct" in the "Broker column"

2. I have invested in SIP before January 4th,2008 whether I will be able to avoid entry load on my SIP which is still continuing?

Ans: Yes. You can definitely avoid the entry load. Just you have to approach the AMC or the Collection Centre / Investor Service centers and request for Entry Load cancellation form. Fill the same and submit to them.

3. Whether entry load will be levied when I switch from One Scheme to another Scheme?

Ans: No entry load will be levied if the investors switching from one scheme to another while dealing directly with the AMC.

4. Whether I will be levied any entry load if I invest through Internet?

Ans: Entry load is waived, only if Investment is made through the fund's official website. Purchases through any other website will attract the entire entry load.