The thirsty crow could drink water from the pot because it continued adding pebbles until the water reached the brim. Similarly, you must continue your Systematic Investment Plans (SIPs) until you reach your goals. However, life may not always go as planned. To accommodate unforeseen emergencies, fund houses offer the flexibility to pause or stop your SIPs midway. Let’s explore SIP stop and SIP pause facilities in detail.
At the end of this article, you will have clear answers to important questions like, “Can I stop SIP anytime?”, “Can I stop SIP in between?” and “Can I stop SIP without redeeming”.
What happens when you stop paying SIP instalments?
If you miss your SIP instalments for three consecutive months, your SIP will be automatically cancelled. After cancellation, you will no longer be able to make further payments into the same SIP even if you have sufficient balance in your account later. However, your investment balance remains intact. The units purchased will remain invested and their value will fluctuate as per market conditions until you decide to redeem them.
Fund houses do not charge any fees if your SIP gets cancelled. However, your bank might levy a penalty for not maintaining enough funds for auto-debits.
How to avoid SIP cancellation due to missed payments?
To avoid SIP cancellation due to missed payments, you can either pause your SIP for a short period or stop it yourself by submitting a request to your fund house.
- Pause the SIP
When you pause your SIP, the auto-debit of instalments from your bank account stops temporarily. Most fund houses allow pausing SIPs for a duration ranging from three months to one year, depending on their policies. Once the pause period ends, the SIP automatically resumes based on the original details, including the SIP amount, date, and frequency.
When you initially start your SIP, you authorise auto-debits from your bank account through a mandate. This mandate remains valid even during your pause term, allowing easy resumption of SIP instalments.
Pausing your SIP does not have any effect on your mutual fund balance. The units purchased before the pause remain invested, and their value continues to fluctuate as per market conditions.
Key points to note:
- Most fund houses allow pausing the SIP only for a limited number of times during its tenure.
- Some fund houses may require you to complete a minimum investment period before becoming eligible for the pause facility.
- Processing SIP pause requests takes time, usually a minimum of five days. Hence, you must submit a request well before your next SIP date to avoid unwanted auto-debits.
- Stop the SIP
SIP stop refers to permanently discontinuing your regular investments through the SIP. This means no more instalments will be deducted, and no additional units will be added to your portfolio. However, you will continue to own the units bought so far, and their value will continue to fluctuate based on market conditions.
To start investing through SIPs again, you must register for a new SIP. Some fund houses now offer the flexibility of resuming the stopped SIP, providing added convenience to investors.
Key points to note:
- Fund houses do not charge any penalties for stopping an SIP at any time.
- The processing time for stopping SIPs is longer, usually up to 21 days. Hence, you must submit the request on time.
Does stopping an SIP lead to automatic redemption?
Stopping an SIP does not lead to automatic redemption of your investments. Even if your fund house does not allow you to resume your stopped SIP, the units already purchased remain intact in your portfolio.
Mutual fund SIPs are designed to help achieve different financial goals. Automatic redemptions might disrupt these plans and add to your cost on account of taxes and exit loads. Hence, fund houses do not process redemptions without your consent.
To redeem your mutual fund units, you must submit a request to your fund house. Upon receiving the request, the fund house will seek your approval to process the transaction. Once approved, units will be sold, and the proceeds will be credited to your account based on the number of units sold and the applicable Net Asset Value (NAV).
Why is it better to stop an SIP explicitly rather than miss SIP instalments?
Although your SIP gets stopped in both cases, it is better to explicitly request your fund house to stop your SIP rather than letting it be cancelled due to non-payment. Here’s why:
- You have better control over your finances
When you plan and stop your SIP intentionally, you gain better control over your finances. Knowing the exact time of cancellation ensures you manage your funds effectively. On the other hand, automatic cancellations due to missed payments can disrupt your long-term investment strategies, especially when you are unaware of the cancellation.
- You avoid penalties
While the fund house does not charge a fee for missed SIP installments, your bank may impose penalties for non-maintenance of funds. However, when you explicitly stop your SIP, you avoid such charges.
- You maintain your mandate
Usually, when you stop your SIP explicitly, your auto-debit mandate remains valid, allowing you to resume your SIP if the fund house provides this option. However, in the case of automatic SIP cancellations, you may have to submit a new mandate, making the process cumbersome and time-consuming.
How to stop or pause an SIP?
To stop or pause your SIP, you can simply visit your fund house’s website or use their mobile app. Here are the steps you must follow:
Step 1: Log in to your account using your registered credentials.
Step 2: Navigate to the section that lists all active SIPs.
Step 3: Choose the SIP that you wish to pause or stop.
Step 4: Click on the pause or stop button. For pausing, you will have to choose the duration too.
Step 5: Acknowledge and confirm your request through email or SMS.
To sum it up
An SIP is a systematic tool for achieving financial goals. It helps tackle market volatility and build wealth through rupee cost averaging and compounding. Thus, it is important to continue investing through SIPs regularly. Options such as pausing or stopping an SIP provide the flexibility to adjust your investments according to your changing financial situation without compromising your long-term goals.
An investor education initiative by Edelweiss Mutual Fund
All Mutual Fund Investors have to go through a one-time KYC process. Investors should deal only with Registered Mutual Fund (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit - https://www.edelweissmf.com/kyc-norms
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS. READ ALL SCHEME-RELATED DOCUMENTS CAREFULLY
The thirsty crow could drink water from the pot because it continued adding pebbles until the water reached the brim. Similarly, you must continue your Systematic Investment Plans (SIPs) until you reach your goals. However, life may not always go as planned. To accommodate unforeseen emergencies, fund houses offer the flexibility to pause or stop your SIPs midway. Let’s explore SIP stop and SIP pause facilities in detail.
At the end of this article, you will have clear answers to important questions like, “Can I stop SIP anytime?”, “Can I stop SIP in between?” and “Can I stop SIP without redeeming”.
What happens when you stop paying SIP instalments?
If you miss your SIP instalments for three consecutive months, your SIP will be automatically cancelled. After cancellation, you will no longer be able to make further payments into the same SIP even if you have sufficient balance in your account later. However, your investment balance remains intact. The units purchased will remain invested and their value will fluctuate as per market conditions until you decide to redeem them.
Fund houses do not charge any fees if your SIP gets cancelled. However, your bank might levy a penalty for not maintaining enough funds for auto-debits.
How to avoid SIP cancellation due to missed payments?
To avoid SIP cancellation due to missed payments, you can either pause your SIP for a short period or stop it yourself by submitting a request to your fund house.
- Pause the SIP
When you pause your SIP, the auto-debit of instalments from your bank account stops temporarily. Most fund houses allow pausing SIPs for a duration ranging from three months to one year, depending on their policies. Once the pause period ends, the SIP automatically resumes based on the original details, including the SIP amount, date, and frequency.
When you initially start your SIP, you authorise auto-debits from your bank account through a mandate. This mandate remains valid even during your pause term, allowing easy resumption of SIP instalments.
Pausing your SIP does not have any effect on your mutual fund balance. The units purchased before the pause remain invested, and their value continues to fluctuate as per market conditions.
Key points to note:
- Most fund houses allow pausing the SIP only for a limited number of times during its tenure.
- Some fund houses may require you to complete a minimum investment period before becoming eligible for the pause facility.
- Processing SIP pause requests takes time, usually a minimum of five days. Hence, you must submit a request well before your next SIP date to avoid unwanted auto-debits.
- Stop the SIP
SIP stop refers to permanently discontinuing your regular investments through the SIP. This means no more instalments will be deducted, and no additional units will be added to your portfolio. However, you will continue to own the units bought so far, and their value will continue to fluctuate based on market conditions.
To start investing through SIPs again, you must register for a new SIP. Some fund houses now offer the flexibility of resuming the stopped SIP, providing added convenience to investors.
Key points to note:
- Fund houses do not charge any penalties for stopping an SIP at any time.
- The processing time for stopping SIPs is longer, usually up to 21 days. Hence, you must submit the request on time.
Does stopping an SIP lead to automatic redemption?
Stopping an SIP does not lead to automatic redemption of your investments. Even if your fund house does not allow you to resume your stopped SIP, the units already purchased remain intact in your portfolio.
Mutual fund SIPs are designed to help achieve different financial goals. Automatic redemptions might disrupt these plans and add to your cost on account of taxes and exit loads. Hence, fund houses do not process redemptions without your consent.
To redeem your mutual fund units, you must submit a request to your fund house. Upon receiving the request, the fund house will seek your approval to process the transaction. Once approved, units will be sold, and the proceeds will be credited to your account based on the number of units sold and the applicable Net Asset Value (NAV).
Why is it better to stop an SIP explicitly rather than miss SIP instalments?
Although your SIP gets stopped in both cases, it is better to explicitly request your fund house to stop your SIP rather than letting it be cancelled due to non-payment. Here’s why:
- You have better control over your finances
When you plan and stop your SIP intentionally, you gain better control over your finances. Knowing the exact time of cancellation ensures you manage your funds effectively. On the other hand, automatic cancellations due to missed payments can disrupt your long-term investment strategies, especially when you are unaware of the cancellation.
- You avoid penalties
While the fund house does not charge a fee for missed SIP installments, your bank may impose penalties for non-maintenance of funds. However, when you explicitly stop your SIP, you avoid such charges.
- You maintain your mandate
Usually, when you stop your SIP explicitly, your auto-debit mandate remains valid, allowing you to resume your SIP if the fund house provides this option. However, in the case of automatic SIP cancellations, you may have to submit a new mandate, making the process cumbersome and time-consuming.
How to stop or pause an SIP?
To stop or pause your SIP, you can simply visit your fund house’s website or use their mobile app. Here are the steps you must follow:
Step 1: Log in to your account using your registered credentials.
Step 2: Navigate to the section that lists all active SIPs.
Step 3: Choose the SIP that you wish to pause or stop.
Step 4: Click on the pause or stop button. For pausing, you will have to choose the duration too.
Step 5: Acknowledge and confirm your request through email or SMS.
To sum it up
An SIP is a systematic tool for achieving financial goals. It helps tackle market volatility and build wealth through rupee cost averaging and compounding. Thus, it is important to continue investing through SIPs regularly. Options such as pausing or stopping an SIP provide the flexibility to adjust your investments according to your changing financial situation without compromising your long-term goals.
An investor education initiative by Edelweiss Mutual Fund
All Mutual Fund Investors have to go through a one-time KYC process. Investors should deal only with Registered Mutual Fund (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit - https://www.edelweissmf.com/kyc-norms
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS. READ ALL SCHEME-RELATED DOCUMENTS CAREFULLY
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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
