What is Systematic Investment Plan SIP?
Many of them are aware of Systematic Investment Plan SIP. It is a way where investors can invest in mutual funds. Here, investors can regularly invest in a disciplined manner. A fixed sum of money is invested periodically – weekly, monthly or quarterly. Investing through SIP makes it more comfortable as an investor need not arrange a significant amount like a lump sum. Instead, one can start with an investment as small as INR 500.
SIP is a pocket-friendly way of saving money. When an investor invests via SIP, they are free to decide the amount to be invested, the interval, and the instalment frequency. Furthermore, they can stop SIP whenever they wish to.
The feature of rupee cost averaging in SIP helps investors to protect their investments from market fluctuations. Hence, an investor shouldn’t stop their SIP when the markets are turning weak. When the markets go down, the NAV goes down and thus fetching more units to the investors. This will help in building a considerable corpus.
Why do investors cancel or pause their SIP in between the tenure?
There are many reasons why an investor can cancel or pause their SIP in between the tenure. The following are some of the reasons –
Many investors are panicked when the markets are fluctuating or falling. Hence, they decide to stop their SIP and sell their mutual funds units when the scheme performs poorly. Although this should be avoided. When the markets turn weak, NAV of funds also goes down. Thus, every mutual fund SIP fetches more units to the investor when the NAV goes down. Usually, SIPs are suggested in equity funds.
When a SIP of a mutual fund scheme consistently performs poorly over a time. This can demotivate an investor. However, it is recommended that investors must talk to an expert like an investment adviser before terminating the mutual fund. Sometimes SIPs offer results in the long run and may revive after a bad phase.
When there is a change in the objective of a mutual fund scheme or its asset allocation, this will affect its returns. Thus, this may not match with the financial goal of the investor furthermore.
A change in the fund manager may affect the mutual fund scheme’s style and performance. Usually, active investors track how the fund is managed and by whom. However, one may or may not hold the expertise in a particular kind of fund investment strategy.
Additionally, if the investor has a financial emergency and does not have enough money for the next SIP instalment, in such cases, investors can cancel or pause their mutual fund SIP. For instance, one can pause their SIP for 2 or 3 months and again resume it after having sufficient money.
To sum up, investing in mutual funds through SIP helps investors to mitigate the market risk and volatility to a great extent. However, many investors do not think this way and stop their SIPs due to fear. Therefore, stopping SIPs is not advisable.
How to stop SIP temporarily?
In case the investor wants to pause their SIP temporarily, then they can consider the following steps.
- They can provide a ‘stop payment’ instruction to the bank.
- They can inform the bank once they want to redeem the plan and prepare the payment.
It is important to note that, if ‘stop payment’ or low balance is held for more than two months, the AMC will cancel the SIP. Therefore, one can miss or stop instalment temporarily. However, it is advisable not to stop or miss SIP instalments for more than two months, especially when the investor does not seek to cancel their SIP plan permanently.
How to stop SIP online?
One can cancel or stop SIP temporarily or permanently through various methods. The time taken to cancel SIP may vary from one fund house to another. As an investor, one must understand that SIP is a voluntary investment. Hence, no charges or fine can be imposed if the investor decides to stop the plan in the middle. (e.g., before the lock-in period). However, there are exit load charges in some cases only if the investor redeems the mutual fund. The following are different ways to stop SIP online.
Through AMC website
Firstly the investor has to visit the mutual fund website for which SIP is continuing. The investor would require folio number, bank account number associated with the folio and PAN as login credentials for the mutual fund website.
Next, the investor has to select the ongoing SIP for which they wish to cancel SIP and click on “Cancel SIP”. The SIP will be discontinued within a few days ( usually 21 working days). Post the waiting period, and SIP deductions will stop. However, investments made till now will remain in the fund until a redemption request or switch request is raised.
Through an agent (if the SIP was done from an agent)
In case the investor has invested in a SIP through an agent, they need to inform the concerned agent. The agent will fill up the cancellation request with details regarding the ongoing SIP. They will submit the cancellation request at the respective AMC.
Through an online distributor platform (if opted from an online distributor platform)
In case the investor opts for SIP through an online distributor platform, they can log in to the distributor or agent’s mutual fund website. Here, the investor needs to select the SIP instruction that needs to be stopped. They need to click on “Cancel/Stop” SIP.
How to stop SIP offline?
The following is the process in which the investors can cancel or stop SIP offline.
Firstly, the investor has to inform the Asset Management Company (AMC) about the ongoing SIP cancellation. Based on this, they need to obtain an Appointment Form from the Asset Management Company AMC office or Registrar and Transfer agents of mutual funds like Karvy and Cams. The investor has to furnish details like the bank account linked to the scheme, name of SIP scheme, folio number, PAN, and the SIP amount in the appointment form. Also, specify the date from when the SIP has to discontinue. They need to submit this duly filled form at the AMC office or RTA office.
It takes 21 days for the SIP cancellation request to be processed. However, this varies from one mutual fund house to another. The investor also needs to visit the local bank branch to cancel the SIP instruction, also known as the NACH mandate. The investor needs to get the written confirmation for the same. Thus, the AMC will get the biller removed from the bank account, and no further SIP deduction will be made in the investment folio. Furthermore, if stop SIP payments instruction is given, and no debit happens for two months, SIP will be terminated automatically by the AMC.
How to stop SIP on Scripbox?
The following is the step by step process to stop SIP on Scripbox online platform.
- Firstly, the investor has to login to their Scripbox account with their login credentials.
- Next, they need to click on the Investment Calendar Tab.
- After that, they need to select the scheme for which they want to cancel the SIP investment.
- Click on SIP Details
- Click on Cancel and select Cancel all upcoming investments.
- Finally, the investor has to confirm the SIP cancellation by clicking on Cancel All Investment.
Besides, Scripbox has several calculators that the investor can use. The SIP calculators can be used for calculating SIP returns. The returns calculator or fund calculator is used for estimating mutual fund returns. Also, there is an income tax calculator used for calculating individuals income tax liability.
It is essential to plan your investments to get a sense of how all investments will achieve the desired results. An investor’s decision about their portfolio is whether to switch, redeem or cancel any of their investments. An investor can easily cancel their SIP via any of the methods mentioned above. Also, one can always keep in mind that SIP cancellation does not come with a penalty. However, it is still advisable to stay invested as long as possible (if the scheme is good and matches the goal of the investor) to develop a good habit of regular investments in mutual funds.
Frequently Asked Questions
A direct plan is where the investor buys directly from the mutual fund’s companies offline from the AMC office or directly from the mutual fund website.
A regular plan is where the investor invests in a mutual fund through an advisor, agent, distributor or intermediary.
The following are the categories under equity fund:
1. Large Cap Fund
2. Midcap Fund
3. Large and Mid Cap Fund
4. Small Cap Fund
5. Multi Cap Fund
6. Value Fund
7. Thematic / Sector Fund
8. Focused Funds
9. Dividend Yield Fund
In addition to the equity and debt category, mutual funds have another category called a hybrid fund. A hybrid fund invests in both debt and equity instruments. To know more about mutual funds, its types and how they work, read our guide to investing.
ELSS or Equity Linked Savings Scheme fund is a tax saving mutual fund scheme. One can invest in Equity Linked Savings Scheme through SIP or Lumpsum mode. However, the investment has a lock-in period for three years.