Systematic Investment Plan i.e. SIP is a disciplined way of investing in mutual funds regularly. Every month, Rs 26,000 crore is paid to various mutual funds in the country through SIP.
In most cases, the amount is automatically debited from the bank at the scheduled time. But sometimes due to circumstances or negligence, investors fail to pay the SIP installments. In such a situation, what effect will the absence of SIP have on your investment? Let’s try to understand this…
Is there a penalty for missing SIP? Mutual funds generally do not impose penalty on missed SIPs, but banks charge a penalty of Rs 150 to ₹750 for not having enough funds in the account for SIP, depending on the bank’s policy. Daily, weekly, 15 days or monthly SIP can be automatically canceled if 3 consecutive payments are missed. Quarterly, fortnightly or longer interval SIPs are canceled if two consecutive payments are missed.
How does this affect our investments? The investment journey undertaken to achieve financial goals may be disrupted. You lose the ability to spread costs in rupiah based on market movements. Each missed SIP reduces the amount invested, which directly affects the compounding power over time and over your corpus. In such a situation, it may be necessary to adjust the timeline of your goals. Achieving your goals may require significant investments in the future.
What type of strategy should be adopted to ensure that the SIP is not missed? Make sure you select the SIP date immediately after the salary arrives. Create a buffer in the account to avoid unexpected expenses and low balance issues. If you are facing financial constraints, reconsider your SIP investments or discretionary spending instead of canceling the SIP immediately. There is a possibility to modify and suspend the SIP if necessary. You can start again later when you have money.
Start investing with a small amount. Increase investments with increased income and lifestyle. Keep in mind Consistency is the key to maximizing cumulative benefits, so keep investing.