No Entry Load on Mutual Funds

Even though SEBI has removed entry load for direct investors, you need to do your homework before exercising that option.

Mutual funds are subject to market risks. Please read the offer document carefully before investing…A footnote that follows every mutual fund advertisement. With the Securities and Exchange Board of India's (SEBI) new guidelines that the applications received directly by the asset management companies (AMCs) and over the internet will get complete entry load waiver, a direct investor will have to follow the above mentioned footnote more seriously.

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No Entry Load

Market regulator Sebi is considering a move to do away with the entry load on mutual fund investments

The Asset Management Companies (AMCs) charge an entry load of upto 2.25 per cent from the retail investors for their investments in equity funds.

With this move the investment in mutual funds will become more cost effective for investors.

However, this waiver will be applicable to investors who will directly interact with the fund houses i.e deposit their applications directly with the AMCs. Applications received through internet or collection centre/ investor service center directly will also qualify for the waiver.

The move is not expected to go down well with the mutual fund distributors as it is this entry load which the fund houses use in paying commissions and brokerage to distributors. Today most of the funds in India are sold through distributors.