Exit fee (fund exit fee) — definition
Exit fee is a charge levied when redeeming investment fund units. What it is, how much it costs and how to avoid it.
What is exit fee?
Exit fee (fund exit fee, redemption fee) is a commission charged when selling (redeeming) investment fund units. It's deducted from the value of redeemed units.
How much does it cost?
In Poland, exit fee is rarer than front-load, but still encountered:
| Situation | Typical fee |
|---|---|
| Redemption before one year | 1-3% |
| Redemption after one year | 0-1% |
| Redemption after 2-3 years | Usually 0% |
| Closed-end funds | 0-5% (decreasing) |
Many funds use declining exit fee (back-end load / CDSC): the longer you hold, the smaller the fee. After 2-3 years it drops to zero.
Example
You have 50,000 PLN in a fund with 2% exit fee (when redeeming before one year).
- You redeem after 8 months: fee 1,000 PLN, you receive 49,000 PLN
- You redeem after 14 months: fee 0 PLN, you receive 50,000 PLN (+ potential gains)
Why does exit fee exist?
- Discourage short-term speculation — the fund needs stable assets
- Cost compensation — if there was no front-load fee, exit fee covers distribution costs
- Protect other participants — mass redemptions lower fund value
How to avoid exit fee?
- Check fee schedule before purchase — every fund publishes a fund card with fees
- Hold long enough — many fees drop to 0% after 1-2 years
- Choose ETFs — no exit fee (you pay only spread and brokerage commission)
- Index funds — generally lower fees
- Negotiate — with large amounts fees are often negotiable
Exit fee vs capital gains tax
Don't confuse exit fee with Belka tax (19% on capital gains). Exit fee is a fund cost. You pay tax separately — on profit after deducting fees.
How Freenance can help
Freenance includes exit fees in your portfolio value calculation. You see real net value — after all costs — and can plan your fund exit timing to minimize fees.
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