How To Stop An SIP If Cash Flows Get Hit?

Given the covid-19 related issues, there have been many cases where individuals have been either hit by a downsizing or have lost heir jobs. In some cases, individuals have also been asked to take a salary cut.

It is highly possible that at such a time when cash flows get hit, you would not be able to continue the Systematic Investment Plan (SIP). With finances getting worrisome, one maybe compelled to stop the SIP, which may not be a bad idea.

How to stop an SIP or discontinue the same?

At the moment, with the stock markets being at a record high, you would anyway have to buy into the SIP at very high net asset value. So, a good way would be to either halt them for a period of 3 months or so, or completely discontinue the same.

In a Systematic Investment Plan facility, one has also to give the mandate to the bank, where the funds are automatically debited from the bank account of the investor. Now, if you do not put a pause or inform the fund through the online facility of discontinuation, the ECS mandate tends to bounce, which is not a good thing to happen.

Therefore, if you are pausing it is good to use the pause option for a few months, where several mutual funds offer that facility online as well.

If you want to stop the Systematic Investment Pan completely you can use the two modes that are available, that is the online and the offline mode. This will enable you to discontinue the SIP.

For example, on the website of every mutual fund, there is an SIP pause form that is available. This forms consists of details like investor details, SIP details, when you want to stop and when you want to resume. This form has to be submitted 15 days before you wish to stop.

With markets at record high, not a bad option?

In the context of the present market scenario, it may not be a bad idea to also partially withdraw given that the Sensex is now inching towards 51,000 points and is at a record high. Normally, no investment advisor would advise to withdraw, but, one also has to look at the market conditions and book profits. For the last few months, investors have been constantly buying into SIPs at very high NAVs and some cases record NAVs. So, if there is an emergency or someone has just lost their job, en cashing your SIP is not a bad idea, given that markets are at a record high.

This maybe a real blessing and those who have invested money over the last 1, 2 and 3 years, would in any case be coming out with windfall gains.