The Buyt Desk
SIP in mutual funds is a long-term investment tool and hence you may miss paying sometimes because of a financial crunch. Let us understand what happens when you miss.
A systematic investment plan (SIP) is one of the best ways to invest in mutual funds. SIP is an investment tool in which the investor needs to invest an amount as per affordability into a mutual fund scheme of investor choice. The investment happens through a bank account so it is necessary to link your bank account to your SIP. On a monthly basis, the SIP amount will be debited on the scheduled date.
Missing Mutual Fund SIP payment
Mutual fund SIP investment is a long-term plan. It needs financial discipline and regular investment into mutual funds. Every month the money will be debited from the bank account so it is the investor’s task to make sure that the SIP amount is there in the bank account on the due date. Because it is a long-term plan, it is quite common to miss one or two due dates. You may miss it because of other financial commitments. Let us see various scenarios of missing SIP instalments and what to do next after missing the due date.
What next after you miss your Mutual Fund SIP?
SIP is a long-term investment vehicle and this makes investors a bit worried because no one knows how their future will be and if they will always have funds in their bank account to pay regularly. They are worried because they may miss a few payments in the long term. Studies say that it is common to miss SIP payments. The top reason for missing SIP payments is the insufficient balance in their bank account. Sometimes investors may forget the due date and miss maintaining the SIP funds in their bank account. You should not worry if you miss a SIP instalment as your investment will continue. Let us see a few scenarios.
The AMC/ Mutual fund house does not charge a Penalty for Non-Payment of Mutual Fund SIP Installment – An asset management company (AMC) or the mutual fund house to whose mutual fund scheme you have invested will not charge any penalty for missing an instalment of Mutual fund SIP. Only when the SIP instalments are missed for 3 consecutive months, SIP get cancelled automatically.
Banks fine on the failure of auto-debit mandate – Bank charges a penalty anywhere between Rs 250 to Rs 750 when you dishonour the auto-debit mandate of mutual fund SIP.
No-Penalty SIP – Jupiter-the neo banking entity has a No-penalty SIP feature. This feature does not charge unfair charges. The No-Penalty SIP is a smart feature that auto-skips any such charges. The bank’s SIP mandate is automatically skipped when the investor’s bank balance is running low.
When you foresee that you cannot continue with SIP – There might be a situation in life where the investor can foresee that they may not be able to pay Mutual fund SIP payments in future.
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In such situations, you can stop the SIP. In that case, already invested funds via SIP will continue to earn returns. You need not withdraw funds when you stop the SIP. You need to apply for a SIP stop request either online or offline with your AMC at least 30 days in advance.
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You can also pause the SIP for some duration until you can restart investing in the same SIP. In this case, there will be no charges by either the AMC or Bank.
Summing up
You need not worry if you have missed a SIP instalment. But make sure you do not miss paying on 3 consecutive months as it will end your Mutual Fund SIP. Frequently missing payments will affect your corpus in a big way. Financial discipline and regular payment are key to building a good corpus.
