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Your Ultimate Guide on How to Stop an SIP in Mutual Funds

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Systematic Investment Plans, commonly referred to as SIPs, enable investors to make pocket-friendly investments on a regular basis for market-linked returns. The popularity of SIPs is certainly on the rise, as a nominal predetermined amount can be auto-debited from your bank account at regular intervals and invested in the chosen mutual fund. This gives you the opportunity to initiate investing even with small amounts and without worrying about timing the market.

However, while the benefits of SIPs are many, there is a possibility that you may want to stop or cancel an SIP, whether due to a lack of finances, availability of better investment options elsewhere, personal reasons, and more. In this article, we will help you understand how to stop SIP in mutual funds and the things you need to keep in mind before opting to stop your SIPs.

Why Do Investors Cancel an SIP?

No charges are applicable for pausing or cancelling SIP at any time during the tenure of the investment. However, considering that individuals turn to SIPs for long-term investments, the question arises – why would anyone want to stop an SIP before tenure completion at all?

As briefly mentioned in the introduction, there are several reasons why an investor may want to pause or stop SIP.

Discussed below are the major ones in detail –

  • Market conditions: Investors may feel insecure when markets display a bearish trend or are too volatile to comprehend, as the mutual fund’s Net Asset Value (NAV) is pegged to market performance and may display similar results. The poor performance of a fund amidst volatile markets may make an investor want to stop SIP and sell the mutual fund units held.
    Ideally, dips in the market may be viewed as buying opportunities, apart from the fact that mutual funds are generally long-term investments. Additionally, the point of SIPs itself is to help tide over volatile markets. Thus, consulting an investment adviser before stopping an SIP can certainly help in making an informed decision.
  • Change in mutual fund scheme goal or asset allocation: Most investors choose mutual fund schemes aligned with their financial goals. However, a change in the scheme’s objective or investment strategy may not align with the investor’s goal anymore. This may make some investors want to move out or take a wait-and-watch stance, which is possible in mutual fund SIPs through the stop SIP option.
  • Change in fund manager: A new fund manager may have a different investing style, which can likely affect the fund’s performance. Several investors keep close track of mutual funds and their management style and cancel SIP if they don’t find the new investing strategy suitable. 
  • Financial crisis: During a personal financial crisis, an investor may be unable to pay the regular SIP instalments. In such cases, they may stop the SIP and liquidate the funds or even pause the mutual fund SIP and resume it later on acquiring or reinstating steady incomes.

Numerous investors often miss this aspect of ‘pausing’ and end up stopping the SIP out of panic. However, pausing an SIP is a good way to arrange for the money or to wait and see the impact of changes in investment style or fund manager. If things don’t improve during the pause, the investor can certainly take the next step of stopping the SIP.

How to Stop SIP Temporarily and Resume it Later?

As mentioned earlier, a remarkable aspect of mutual funds SIPs is that you can pause your SIP temporarily and resume it later when you have a steady influx of income and the required funds.

So if you have decided to pause your SIP, you can simply contact your mutual fund house and submit a form that nullifies the previous agreement of debiting your account to purchase mutual fund units. This is easy when you take the online route, as the whole process can easily be completed with just a few clicks or taps of your laptop or smart screen.

Additionally, you would also have to give the linked bank a ‘stop payment’ instruction towards your existing SIP investment. You can later contact the bank to resume the SIP plan.

It’s worth noting here that you must not keep your SIPs in the paused or low balance state for more than the maximum duration defined by the SIP plan. This duration ranges from 1 to 6 months and exceeding it may cause the permanent cancellation of your SIP.

How to Cancel SIP Online?

Both permanent and temporary SIP cancellations can be made online. However, the cancellation time (when the stop order comes into effect) can be different for different fund houses.

Pausing an SIP does not attract cancellation charges if you discontinue the plan before maturity. However, you may have to bear the exit load charges if you wish to redeem the mutual fund.

Given below are some ways to stop SIP online –

1. By contacting the agent

If you have used the services of an agent to invest in a SIP, you can contact the agent and ask them to complete the SIP cancellation form online and submit it to the concerned AMC (Asset Management Company).

2. Through the AMC website

To cancel an SIP directly through the mutual fund website, you would be required to enter relevant details like the folio number, bank account number, and more.

  • After this, you will get the option to cancel an SIP by selecting it
  • Note that all mutual fund houses have varied waiting periods, and the deductions will stop only after this
  • The money invested till the cancellation date will, however, stay in the fund till the investor raises a redemption request 

3. Offline SIP cancellation

This mode of cancellation, less convenient than the online mode, would require you to inform the AMC offline about your intent to cancel the SIP. Given below are the things to be considered to stop SIP offline –

  • As an investor, you will need to physically visit the mutual fund office and submit a form regarding the cancellation. This form will require details related to your bank account, scheme name, SIP amount, discontinuation date, and folio number.
  • The completed form is to be submitted at the AMC. The SIP will be cancelled around 2 weeks or a month after the placement of the cancellation order.
  • Remember that the SIP instruction would also need to be cancelled with the bank. This may require a written confirmation to be sent to the bank in the offline mode.

Once the mentioned processes are completed, the biller will be removed from the bank account and SIP deductions will stop. As discussed earlier, if the account is in a stop SIP payment state for more than a few months (as per the AMC), your SIP will be terminated.

Key Takeaways

Prudent investment planning for the long term is paramount to stable financial health. SIPs certainly make for a great choice here, as they can help you fulfil your long-term goals by investing in small bits over time. However, you can always cancel an SIP plan by contacting your agent or requesting your AMC for the same (online or offline, depending on your choice) as per the requirement of your situation.

You are free to pause, cancel, switch, or redeem your SIP if you face changing investment goals or a lack of finances. You could also be cancelling your SIP due to changes in the fund management or its asset allocation strategy.

Having said that, most SIPs offered by the leading AMCs in the country tend to provide attractive returns in the long term. So if your SIP aligns with your investment goals, it would be advisable to continue the SIP or take a pause instead of going for the cancellation.

To get the best advice tailored to your financial goals and requirements, you can always get in touch with us and connect with one of our experts.

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