A systematic investment plan (SIP) is an excellent way of investing in mutual funds. It allows you to invest small amounts on a monthly, quarterly, or yearly basis. Investing via SIP is the most popular mode of investing in mutual funds among young investors. It instils financial discipline by forcing you to set aside a fixed sum regularly.
1.Why investors stop SIPs?
Many investors decide to stop their SIP and exit mutual funds when the stock markets fall, which is not a good move. When the markets fall, you should increase the ticket size of your SIP and buy more fund units when the stock markets fall. Investing in mutual funds through SIPs with a long-term horizon will help you mitigate market risk and volatility to a great extent. However, many investors do not think this way, and they stop their ongoing SIPs.
Stopping SIPs is not advisable. However, if you still want to stop SIPs, the following are the steps:
2.Online SIP cancellation
- Log in to your mutual fund account and click on ‘cancel SIP’. The SIP will be cancelled within 30 days.
- If you have invested through an agent, then you can cancel SIP through the agent’s portal as well.
If you have activated ECS for SIP payments, then you should inform your bank through which payments are made to deactivate the ECS and then notify the mutual fund house. A SIP would be terminated when the ECS payments are not made for a certain number of times.
- Inform the mutual fund house and the bank from which the payments are made.
- Fill the relevant form issued by the asset management company (AMC). You have to mention the date from which you would like to discontinue the SIP.
- Submit the form to the AMC. It may take up to 21 days to discontinue a SIP.
- If you have submitted post-dated cheques for SIP payments, then unused cheques would be returned.
There are times when you fall short of money due to various financial commitments. An emergency may arise which requires you to divert funds from SIP. In situations like these, you can pause SIP investment for a while. Investors are allowed to pause their SIP up to three months, and the AMC would make a final call.
Stopping SIPs is never a good idea. However, if you have decided to terminate your SIP, then you may choose to follow any one of the steps mentioned above. You should be aware of the fact that the AMCs are not supposed to impose any penalty on stopping SIPs.