What is SIP?
Mutual funds have become one of the most attractive investment options in recent times. This is on account of many factors like increased investor awareness, increased returns over some time, ease of access to mutual funds, and the availability of investment options for every investor class.
There are two modes of investment in mutual funds through lumpsum mode or SIPs. SIPs are Systematic Investment Plans where the investor has the option to invest in the selected mutual fund at regular intervals like a weekly basis, monthly basis, quarterly basis, or annual basis. The amount of investment can be as low as Rs. 500 or Rs. 100 in case of certain funds. Investors have to set a mandate with their bank account that will auto-debit the amount of SIP at regular intervals until the time that such SIP is stopped by the investor.
Reasons to stop SIP
It is not advisable to stop SIPs as they provide a cheaper source of investment option at reduced risks. It is also an ideal option for investors that have a limited investment budget and long-term investment goals. However, there may be several cases when the investor has to choose to stop their SIPs and move away from their investment. Some of such reasons for stopping the SIP are mentioned below.
Market volatility is a big factor for the exit of investors especially, risk-averse investors. Many investors redeem their investment in the fund if the NAV of such a fund reduces drastically and if the performance of the fund is too volatile on account of market volatility. Ideally, such volatility is part of mutual fund investments and should not be a reason for cancelling the SIPs.
Consistent poor performance of the fund
Another important contributing factor for cancelling SIP is the poor performance of the fund. If the performance of the fund is consistently poor and fails to provide cost-effective returns to the investors, it often leads the investors to turn away from the fund and cancel their SIPs.
Change in asset allocation or objective of the fund
A change in the fund’s asset allocation or the objective of the fund can also result in the investors cancelling their SIPs. This may no longer match with the objectives or the risk parameters of the investor leading them to exit the fund by cancelling their SIPs.
Apart from the reasons mentioned above, some other contributing reasons for cancelling SIPs can be,
- Realization of investment objective
Once the investment objective or goals of the investor are achieved, the investor may no longer need to stay invested in the fund. The investor will require to redeem their investment to meet their financial needs. This can be a strong reason for cancelling a SIP.
- Change in fund manager
Change in the fund manager may not always be a reason for cancelling the SIPs. However, if the new fund manager has new fund strategies that are not in line with the investor’s objectives or goals or risk factors, they may opt to cancel their SIP in such a fund.
- Any financial emergency of the investor
Another important factor that may warrant cancelling of the SIP may be any financial emergencies of the investor. Such financial emergencies may require them to get immediate access to funds by redeeming their investment to meet their financial needs.
Ways to stop SIP
There are two broad ways to stop a SIP namely, offline mode and online mode. The details of each of such modes are mentioned hereunder.
The offline mode of cancelling the SIP is when the investor physically submits the required form to the concerned authority at the AMC or the Registrar and Transfer Agents office. The detailed process for the same is given below.
- The first step for the investors is to inform the AMC regarding the request for cancellation of the current SIP.
- Investors will also have to inform the bank where they have set the auto-debits for the SIP.
- After initiating the process, investors will have to get the Appointment Form from the AMC or the RTA of mutual funds.
- In this Form investors will have to furnish various details like
- The bank account of the investor that is linked to the scheme
- Name of the SIP Scheme
- Folio number
- PAN number
- Amount of SIP
- Date from which SIP is to be discontinued
- This form has to be duly submitted to the AMC office or the RTA office.
- It is to be noted that the cancellation request for the SIP will take 21 days to be processed and varies based on the fund house.
- The investor will have to submit a written request with the bank to cancel the SIP which is known as the NACH mandate.
- Once the Stop SIP instruction is given to the bank and no amount is debited to the account for two months the SIP will be terminated by the AMC.
The online mode of cancelling the AMC can be done through any of the following modes.
- Through the AMC
- The first step is to visit the AMC website and login into their account.
- The next step is to select the current SIP that needs to be cancelled and click on ‘cancel SIP’
- This will cancel the selected SIP in the given number of days (usually 21 working days)
- Post this waiting period, SIP deductions will be stopped.
- The investment already made will remain in the fund till a redemption request or a request to switch is initiated.
- Through the agent (For regular mutual funds)
- Investors will have to contact the concerned agent through whom they have invested in the SIP.
- The next step is to fill the required form for the cancellation request with all the required details of the SIP.
- This cancellation request will be forwarded to the concerned AMC by the agent.
- Through distributor (For regular mutual funds)
- When the SIP is invested through any distributor or agent’s mutual fund website.
- The next step is to select the SIP instruction that needs to be cancelled.
- Investors will have to click ‘Cancel or Stop SIP’.
How to stop SIP through Finity App
One of the easiest ways to stop SIPs is through the Finity App, if you have invested through the app. This app can be downloaded through Google Playstore and Apple Store. Investors can easily invest in the required mutual funds by selecting the necessary funds and making online payments for the same through any of the available modes.
The steps for the same are,
- The first step is to login to the Finity App using the login credentials like username and password.
- After logging in, Go to the Portfolio section of the app (On the bottom tab of the app).
- Your existing SIPs are shown, click on the one you wish to cancel.
- By the way, you can also pause your SIPs, instead of cancelling them if you wish to stop them just for a couple of months.
- The next step is to select the option to cancel SIP and cancel all upcoming SIP payments
- The final step is to click on confirm for the request to be processed.
It is to be noted that like offline mode, investors will have to update their bank as well for stopping the SIP payments.
Mutual funds provide the best results if the investor stays invested for a longer duration. Hence, cancelling a SIP is not always advisable unless it is quite necessary. Investors also have the option to pause a SIP if they do not wish to cancel it.
1. Can an investor stop all the SIPs at the same time?
A. Yes. Investors have the option to cancel all their SIPs at the same time or a few of the select SIPs as per their convenience.
2. Is there any penalty charged for cancelling a SIP?
A. No. Cancelling a SIP will not attract any penalty to be paid by the investor.
3. Is the option of SIP available for every mutual fund?
. Yes. investors can opt to invest in mutual funds through SIP for every mutual fund option.
4. How long can a SIP be paused?
A. investors can pause SIP for a minimum period of 1 month and a maximum period of 3 months or 6 months as per the AMC guidelines.
5. Is the SIP cancellation form available with AMCs?
A. Yes. The SIP cancellation form is available on the website of the AMC or RTA office.