Are there penalties if I choose to withdraw earlier from Mutual Fund?

Every open-ended scheme offers liquidity that is there is no restriction on the time or amount of redemption. However, a few schemes may specify an Exit Load.  First, let us understand the concept of the load in case of mutual funds. Mutual fund houses collect an amount from investors whenever they join or leave any scheme. This fee charged is called as the load. Exit load is basically the fees charged for leaving a particular scheme or company as an investor.

For example, a  scheme specifies an exit load of 1%, if redeemed within 1 year. What it means is that, if an investor has invested on April 1, 2016, any redemption done on or before March 31, 2017, would attract a penalty of 1% on the NAV. If an investor redeems on February 1, 2017, with the NAV at Rs. 200, then Rs. 2 would be deducted and only Rs. 198 per unit would be returned to the investor.

All information on exit loads is usually mentioned in relevant scheme related documents. For instance, a fund fact sheet or key information memorandum would contain such information.