Missed An SIP

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Starting a Systematic Investment Plan (SIP) is like a long-term commitment. You give standing instructions to the fund house to debit a fixed amount from your bank account every month (or quarter) on a particular date. Have you ever thought what will happen if you do not have the required balance on your bank account on that particular day and the SIP doesn't go through?
"The fund house cancels your SIP if you miss three consecutive instalments," says Tamanna Varma, a Certified Financial Planner (CFP). The fund house doesn't penalise you for missing an SIP instalment, but if it happens continuously for three times, it would cancel your SIP. This is because as per the ECS mandate, the fund house needs to send debit requests for a minimum three months.
"Your bank would penalise you for dishonouring the payment," says Varma. These charges would vary with every bank. For example, ICICI Bank charges Rs 350 if you fail to honour one SIP in a month.
Short on cash?
"If you are aware of the insufficient balance and see a liquidity crunch for next 3-4 months, you can stop the SIP to avoid bank charges," says Vivekh Pathak, Founder, Finance and You. It takes around 10 days if you submit the request through the online channel and about 30 days if you prefer the old paper form format, he adds. You will have to re-start your SIP again when you are financially comfortable.
"Alternatively, you can also opt to pause your SIP by submitting a request with the fund house," says Pathak. This will stop your instalments temporarily for a short period and will automatically start it after that. "Not all fund houses provide SIP pause facility," informs Varma.
How to make up for it?
"Missing out too many SIP instalments will defeat the main purpose of averaging out costs," says Pathak.
As you know, the main purpose of investing through the SIP route is to reduce the risk of catching the market at a wrong phase, navigate the volatility and average out the purchase cost in the long run. The SIP route would help you to buy more units when the markets are low. That means if you miss paying for the SIP instalment when the markets are in the bad phase you will lose an opportunity to buy a higher number of units. "Moreover, if you are missing it too frequently you might miss on the required corpus amount as the required contribution is affected," adds Pathak.
Experts ask investors to make up for the loss by making additional purchases in the same scheme in the same folio when they have enough funds. "Make an additional purchase equivalent to the SIP amount in the same folio when you have funds," says Tarun Saxena, CFP, AP Financial Services. This will help you to create the targeted corpus without any difficulty. "The best would be to fulfil it in the same month to avoid any loss on the averaging front," says Saxena.

Source : Economic Times

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