What is Entry Load? A Simple Guide for Investors
An entry load was a fee once charged when you invested in a mutual fund, reducing the units you received. In India, SEBI abolished entry loads in 2009, so investors no longer pay them. The term remains useful to understand older material and the shift to direct plans.
You may come across the term entry load in older mutual fund content. It once cost investors money upfront, but that changed years ago.
Knowing its history clears up confusion. We will cover the idea, an example, and the practical takeaways. You can explore mutual funds on Stockk.
Key Takeaways
- An entry load was an upfront fee to invest.
- It reduced the units you received.
- SEBI abolished entry loads in India in 2009.
- Investors no longer pay entry loads.
- Costs now show up mainly in the expense ratio.
What was an entry load?
An entry load was a percentage fee deducted from your investment before units were allotted, so you received slightly fewer units than the amount you paid for. It was used to pay distributor commissions. This reduced your effective starting investment.
Suppose you invested ₹1,00,000 when a 2% entry load applied. ₹2,000 went to the load, and only ₹98,000 worth of units was allotted to you. That gap worked against you from day one.
Why was it abolished?
SEBI removed entry loads in 2009 to make mutual funds fairer and cheaper for investors. Since then, you invest the full amount, with no upfront deduction. Costs are now reflected mainly through the annual expense ratio and, where relevant, exit loads.
Then vs now
| Aspect | Before 2009 | Now |
|---|---|---|
| Entry load | Charged | Abolished |
| Units allotted | Reduced | Full amount |
| Main cost | Load plus expenses | Expense ratio |
Why the term still matters
Although entry loads no longer exist, understanding them explains the rise of direct plans and the focus on the expense ratio. It also helps you read older articles correctly. Today, the key costs to watch are the expense ratio and any exit load.
Ready to start? You can explore mutual funds on Stockk, with Indira Securities as your SEBI-registered partner. Opening a free account takes minutes, and the Knowledge Center has more guides on mutual funds.
Mutual fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not a guarantee of future returns, and this article is for learning only, not investment advice.
Frequently Asked Questions
Do I pay an entry load today?
No. SEBI abolished entry loads in India in 2009, so you invest the full amount with no upfront deduction.
What was the purpose of an entry load?
It funded distributor commissions by deducting a fee before allotting units, which reduced your effective starting investment.
How are fund costs charged now?
Mainly through the annual expense ratio, plus an exit load if you redeem early. There is no entry load anymore.
Why is the term still discussed?
It explains the shift to direct plans and the focus on expense ratios, and helps in reading older mutual fund material.
Did abolishing entry loads help investors?
Yes, it meant the full amount is invested from day one, lowering costs.
Investments in securities market are subject to market risks. This article is for educational purposes only and does not constitute investment advice.
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