A systematic investment plan or SIP is an efficient way to invest regularly in mutual fund schemes. It typically involves investing a small sum every month as opposed to investing a lump sum in one go. You can opt for monthly, quarterly or even yearly SIPs. Starting, pausing and cancelling SIPs is fairly easy. Let’s look at how you could go about it:
Mode of transaction
It is important to remember the platform used for starting the SIP—whether it was directly done on the MF’s website, a digital platform or through a Mutual Fund Utility (“MFU”) or stock exchange platform. Cancelling the SIP may require you to access the same platform with valid credentials.
Stopping or pausing a SIP using the online mode is a relatively less cumbersome process. One has to use your login credentials (user name, password, folio number) on the same platform used for starting the SIP. Every platform could have a different user interface. You need to just follow the instructions to ‘cancel’ the SIP. If you have forgotten the login credentials, don’t fret. You can retrieve them by using either your folio no, registered mobile number or email address.
This may require filing an application form and submitting it to the MF office or a distributor. Usually, the forms are available on the asset management companies’ (AMC’s) website. One can download and print the form, fill in the required details and follow other instructions. The form may require the signatures of the unit holder(s). Most physical forms come with an acknowledgement slip which a unitholder can get stamped from the AMC office/representative.
Before cancelling your SIP you need to be aware of your payment cycle. For instance, if your SIP instalment is paid on the 10th of every month. You may be required to stop as much as 2-3 weeks in advance, particularly in case of offline transactions. As a result, you may have to start the cancellation process in advance if it involves submitting physical forms.
Instructing the bank
If you have authorized auto payments or debit through your bank account for SIPs. make sure you check if the SIP payment has got cancelled on the set auto-debit date. Ensure you check back with the AMC if there is no acknowledgement to an SIP cancellation request.
Redeeming existing investments
It is important to note here that pausing or cancelling a SIP doesn’t mean that you are redeeming your investments. The units acquired through your past SIP payments, remain invested in the market. The net asset value (NAV) of these units can go up or down depending on how the market behaves. One can continue with them without committing any fresh investments. However, to withdraw your investments, you will have to follow the redemption process. You can redeem either the entire investment or a part of it.
Cancelling versus pausing
The real benefit of an SIP is accrued over the long term. As an SIP involves investing in a bunch of shares or securities at a regular interval, it helps iron out the impact of any volatility. Starting and stopping an SIP with a view of timing the market isn’t a prudent strategy.
However, if one faces a cash crunch or needs to divert funds to other purposes, one can pause the SIP. Pausing an SIP is allowed only for a few instalments. So, if one is sure about restarting the SIP on the same scheme, the ‘pause’ option can be used. However, in case of any uncertainty, it is better to cancel altogether and start anew later.