With the introduction of the new exit load charges on equity mutual funds, is it not advisable to invest in FDs?
— JS Johar
Firstly, equity mutual funds and bank fixed deposits are strictly incomparable. Apart from that, the exit load levied on equity funds are contingent deferred sales charges, which means that the load is not applicable if you stay invested in the fund for a certain period of time. Generally, this period is of a year or 2 years. Equity fund investments should be made for the long-term, and exit loads on short-term redemptions are levied to encourage long-term investing. At the same time, SEBI has made it mandatory that all exit loads will go back to the fund, not to the AMC. This way, the behaviour of short-term investors will have a lesser effect on the long-term investors of the same fund.
This article was originally published on January 16, 2013.
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