Is there any Penalty for Missing a Mutual Fund SIP installment?

A systematic Investment Plan, or SIP, is a strategy that allows investors to invest their money in Mutual Funds regularly. So, what happens when you accidentally miss your SIP installment?

Though the mutual fund SIP plan in which the investor has subscribed shall not charge any penalty or initiate any action for non-payment, banks may charge a penalty for defaults on delayed payments and in case the SIP is missed on a continuous basis for 3 consecutive months, then the SIP is automatically canceled.

In this Achal Chaurasia latest news, let’s talk a bit about the features of a mutual fund SIP installment which can help you clear all your doubts!

What Is a SIP Or Systematic Investment Plan?

A Systematic Investment Plan (SIP) is a payment feature provided by mutual fund companies that allow investors to contribute a certain amount to the mutual fund scheme. Moreover, investors will be able to pay on a monthly basis or at any other intervals that they are comfortable with! To make these payments, you must authorize Electronic Clearing Service (ECS) and National Automated Clearing House (NACH) with your bank in order for the chosen amount to be automatically debited from your bank account

When does one miss a Mutual Fund SIP?

It is a common phenomenon that an investor’s SIP can get missed. When this happens, the investor needs to maintain the minimum balance in his/her bank account. If this rule is violated for three consecutive months, then the SIP will be automatically canceled. 

However, AMC will not charge any penalty or action against the investor; instead, he/she may be charged a penalty by his/her bank because of defaulting on payments. Apart from that, missing one SIP installment doesn’t mean you also have to withdraw your previous installments; it’s not mandatory. Instead, you will get prolonged returns on your previous investments, till the day you decide to without that amount from your SIP account!

Moreover, to avoid missing a SIP installment in the first place, many investors tend to pause their SIPs for a particular month or period. Of course, later they can resume their systematic investment plans only when they are comfortable doing so; the bank won’t be able to pressurize in that matter.

What happens When you Actually Miss a SIP?

If your SIP is missed, the AMC or the Asset Management Company doesn’t impose any penalty or severely penalize you. Instead, it prompts you to make up the difference so that your auto-debit payments/cheques can be honored. 

As a result, If you don’t have enough money in your account, however, your bank may force you to pay extra interest charges for being late with payments. But if you’re too inconsistent with your SIP payments, however, your SIP may be temporarily suspended if you miss 3 straight installments.

How to prevent missing your mutual fund SIP?

If you don’t want your SIP payments to be interrupted, then it’s better to stop it beforehand! 

However, keep one thing in mind: just stopping your SIPs won’t mean that you’re withdrawing your mutual funds, as the funds that have already been invested through your account will continue to produce returns. But, there is also another option, where you can even pause your SIP payments for a while, and then continue them without charges. To do this, contact the AMC or bank where you’ve set up your SIP and place a SIP Stop Request at least 30 days in advance.

Having said that, if you indeed want to stop your SIPs, then you have to contact your Distributor or AMC; they can accept your SIP Stop Request in both offline and online modes. However, it might depend on the convenience of your distributor so, it’s better to have a chat with them face-to-face and make things clear!

Final Thoughts

In this Achal Chaurasia latest news, we’ve discussed some of the essential facts on mutual fund SIP. Saving money and investing your hard-earned cash is a lot easier when you have the right system in place. A SIP, or Systematic Investment Plan, is a payment feature provided by mutual fund companies that allow investors to contribute a certain amount to the mutual fund scheme of their choice on a monthly basis at predetermined intervals. You can set it up yourself or let your advisor handle the tedious process.

Also, read- How to choose the right bank for home loan?

Author- Achal Chaurasia

A superior and highly experienced entrepreneur in the field of business for quite a long time now. Also, a philanthropist, author, and public speaker who believes in working towards the overall well-being and betterment of society as a whole.

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