Most investors are familiar with the Systematic Investment Plan (SIP). It is a method for investing in mutual funds. Here, investors can consistently make disciplined investments. Every week, month, or quarter, a specific amount of money is invested. It is more comfortable to invest via SIP because the investor does not need to set aside sizable amounts of money as a lump sum. Instead, one can begin with as little as Rs. 500 in investment.
A SIP is a cost-effective method of investing money. An investor investing through a SIP has complete control over the amount to be invested, the time interval, and the frequency of the installments. Additionally, they have complete control over SIP termination.
What Are Mutual Funds?
It is a trust that accumulates funds from multiple participants with a shared investment purpose and invests them in stocks, bonds, money market instruments, and/or other securities. And after deducting any necessary costs and fees, the income or gains from this pooled investment are distributed among the investors by figuring out the scheme’s “Net Asset Value,” or NAV.
Mutual funds offer numerous investment options across the financial spectrum. As investing objectives differ, like post-retirement costs, funds for children’s education or marriage, house purchase, etc., so do the products needed to meet these objectives. The Indian mutual fund sector provides various schemes to meet investors’ diverse needs.
What is a Systematic Investment Plan (SIP)?
A Systematic Investment Plan (SIP), also referred to as a SIP, is a service provided by mutual funds to help investors make disciplined investments. The SIP option enables an investor to make fixed investments in the mutual fund scheme of their choice at predetermined intervals. The predetermined SIP periods might be weekly, monthly, quarterly, semi-annually, or annually, and the fixed amount of money can be as low as Rs. 500. By investing via SIP, the investor invests in a time-bound manner without worrying about market dynamics and usually stands to gain from average costing and the power of compounding over the long term.
How To Stop SIP Online?
It is not recommended to discontinue SIPs because they offer a low-cost investing alternative with reduced risk. It is also the best choice for investors with a limited investment budget and long-term investment objectives. The investor may, however, have to make the decision in a number of circumstances to cancel their SIPs and withdraw from their investment.
SIP can be terminated or stopped in a number of ways, either temporarily or permanently. The period required to terminate a SIP may differ from one fund house to the next. One must realize as an investor that SIP is a voluntary investment. As a result, if the investor chooses to terminate the plan in the middle, no penalties or costs will be levied (e.g., before the lock-in period). In certain circumstances, however, exit load fees only apply when an investor redeems a mutual fund. The following are a few different ways to stop SIP online:
Through AMC website: First, the investor must go to the mutual fund website where the SIP is still active. As login information for the mutual fund website, the investor would need their folio number, the bank account number associated with their folio, and their PAN. After that, the investor must select the ongoing SIP they want to discontinue and click “Cancel SIP.” Within a few days, the SIP will be discontinued. Following the waiting time, SIP deductions will stop. Nonetheless, investments made up to this point will stay in the fund unless a redemption or switch request is made.
Through an agent (if the SIP was done through an agent): If the investor has invested in a SIP through an agency, they are required to notify that agent. The agents will include information about the ongoing SIP in the cancellation request. They will send the cancellation request to the relevant AMC.
Through an online distributor platform (if opted from an online distributor platform): If the investor chooses SIP through an online distributor platform, they can log in to the mutual fund website of the distributor or agency. Here, the investor must choose the SIP instruction that must be stopped. They must select “Cancel/Stop” for SIP.
How To Stop SIP Offline?
The procedure for cancelling or stopping SIP offline for investors is as follows:
The investor must first notify the Asset Management Company (AMC) of the ongoing SIP cancellation. Based on this, investors must obtain an Appointment Form from the Asset Management Company AMC office.
In the appointment form, the investor must include information about the bank account connected to the plan, the name of the SIP scheme, the folio number, the PAN, and the SIP amount. Additionally, include the deadline for the SIP’s termination.
Usually, the SIP cancellation request is completed in 21 days. This, however, differs from one mutual fund house to another. To cancel the SIP instruction, also known as the NACH mandate, the investor must go to the nearest branch of their bank. The investor needs to get written confirmation of the same. As a result, the bank will take the appropriate action and there won’t be any more SIP deductions made in the investment folio. Additionally, the AMC will immediately terminate the SIP if a cancelled SIP payment order is given and there hasn’t been a debit for two months.
SIP Pause Option
If the finances aren’t sufficient to cover the everyday expenses, investors might think about suspending SIPs. However, it’s generally advised to keep at least three months’ worth of SIPs in your emergency fund to assure the continuation of investment for the achievement of long-term financial goals. Additionally, when investors run out of money, most experts advise pausing SIPs rather than cancelling them. Follow these steps to pause SIP:
Investors must access the investor account by using the website of the AMC where they made SIP mutual fund investments.
Then, go through the SIP transactions to see information about all of the currently active SIPs with the fund company.
Generally, SIPs can be paused for a minimum of one month and a maximum of six months if investors choose the SIP Pause option. Some AMCs allow you to pause SIPs for up to three months.
One must fill out the online SIP pause form and specify the length of time they want to pause SIPs.
Upon the end of the SIP pause period, the SIP will automatically start.
Why Pause SIPs In Mutual Funds?
Banks would impose a penalty if you failed to comply with your SIP ECS (Electronic Clearing Service) mandate. An ECS is an electronic mode of payment/receipt for transactions that are repetitive and periodic in nature. This may be a problem for investors if they lack the finances to maintain SIPs and now have to pay a penalty. However, the SIP pause feature is useful because if investors activate it, the AMC will send instructions to the bank instructing them to suspend the SIP mandate for the duration selected.
Consider the following points prior to suspending the SIP:
If investors plan to pause SIP, they must notify the AMC in advance. The bank has been given instructions based on the ECS mandate, and pausing the mandate could take some time.
Investors might only be able to pause SIP for a short while using AMCs. Depending on the AMC, it may be between three and six months.
Depending on the AMC, the SIP pause facility may be available only once or twice during the SIP mandate.
Conclusion
It is necessary to plan your investments in order to gain a feeling of how all investments will achieve the desired results. The choice of whether to switch, redeem, or cancel any investment in a portfolio is made by the investor. The investor can cancel their SIP using any of the methods mentioned earlier. To form a good habit of routine mutual fund investments, it is still advised to stay invested for as long as possible (if the scheme is suitable and fulfils the investor’s purpose).
Frequently Asked Questions (FAQs)
Q. Why Do Investors Cancel Or Pause The SIP In Between The Tenures?
An investor may choose to pause or cancel their SIP during the tenure for a variety of reasons. Some of the reasons include the following:
When markets are fluctuating or falling, a great number of investors experience panic. When the scheme underperforms, they, therefore, decide to suspend their SIP and sell their mutual fund units. Nevertheless, this should be avoided.
When a systematic investment plan (SIP) of a mutual fund scheme repeatedly underperforms over time. An investor can become discouraged by this. However, it is advised that before terminating a mutual fund, investors should consult a professional such as an investment adviser. Sometimes SIPs give results in the long run and may or may not recover after a rough patch.
Changes in the objective or asset allocation of a mutual fund scheme will have an effect on its results. As a result, it’s possible that this doesn’t align with the investor’s financial objectives.
The style and performance of the mutual fund scheme may vary if the fund manager changes. Typically, active investors monitor who manages the fund and how it is managed However, one may or may not be knowledgeable about a specific type of fund investment strategy.
Additionally, investors can stop or cancel their mutual fund SIP if they have a financial emergency and do not have enough money for the subsequent SIP instalment. One could, for instance, pause their SIP for two or three months before restarting it once they have enough money.
In conclusion, SIP mutual fund investing significantly reduces market risk and volatility for investors. However, many investors do not think this way and stop their SIPs out of fear.
Q. How To Stop SIP Temporarily?
Investors can think about the steps below if they want to temporarily halt their SIP:
They have the option of giving the bank a “stop payment” instruction.
When they are ready to redeem the plan and make a payment, they can notify the bank.
It is significant to remember that generally, AMC will terminate the SIP if a “stop payment” or low balance is retained for more than two months. Therefore, one can miss or stop instalments temporarily. But it’s best to avoid skipping or discontinuing SIP payments for more than two months, particularly if the investor doesn’t want to terminate the SIP plan permanently.
Q. Can an investor stop all the SIPs at the same time?
Yes. Investors can cancel all their SIPs at the same time or a few of the selected SIPs at their convenience.
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