Managing your systematic investment plans during uncertain times
Summary: Financially challenging times does not mean you give up on your mutual fund investments. You can utilise the facility of pausing your SIP payments by visiting your AMC or bank's website or through their app. Simply un-pause when you are ready to start your SIP again and keep planning for your financial future.
Are you concerned about keeping up with your Systematic Investment Plan? The implications of global events like the Coronavirus outbreak may have put you on the spot.
Economic downturns and other significant events tend to restrict cash flows. As a trickle effect managing everyday expenses and planning for your financial security at the same time can be challenging. Whether you have monthly, quarterly, or yearly SIPs, an economic scenario like the current one may leave you second-guessing. In all this, you may speculate on how to manage your SIP payments.
Thankfully, we have a way to help you tide over these uncertain times.
As you are well aware, an investor can either make lumpsum payments or leverage SIP to invest in mutual funds. If for any reason you are unable to fulfil your mutual fund obligations, you can simply pause your SIP payments. Yes, it is as simple as it sounds. Fund houses, banks and AMCs understand that investors may experience financial emergencies. To help the investors through uncertainty, they have the 'pause SIP' option.
We'll take you through the benefits of pausing your SIP, the factors to consider, and end with an answer to "how to pause SIP" in this article.
There are multiple benefits when you pause your SIP instead of stopping it. These include:
- Provides you with a breather:
When you pause SIP, you get some time off from worrying about fulfilling it. Be it a 1-month pause or longer; you get the time you need to manage your most immediate expenses as well as find a way to budget for your future SIP payments.
- Keeps your plan for your financial future on track:
What's a minor setback or change in a short-term plan when you are planning for the long-term? Stopping your SIP could significantly derail your financial planning. However, pausing the SIP instead means keeping the train on track with only a small bump.
Now that you know the advantages of pausing your SIP instead of stopping it let's take a look at the next step.
If you have multiple SIP payments for different mutual funds, you need to consider three crucial factors to help you determine which one to pause or continue. The three factors are as follows:
- Number of times you can pause SIP:
Typically, fund houses or banks allow the investor to pause SIP once or twice only. If you think this is absolutely the right time to take a break from making your SIP payments, then reach out to your bank or fund house.
- Maximum allowed period to pause SIP:
Most banks, fund houses and AMCs allow the mutual fund investor to pause SIP payments for a few months. This will give you the mental space to plan your next move. So, think about how much time you need and pause your chosen systematic plan accordingly.
- Request acceptance day:
Let's say your SIP payment is scheduled to be processed on the 31st of every month. However, you want to pause your plan for one month. If you put in a request to pause on the 25th, but it takes seven business days to process that request, your SIP payment will still be processed on the 31st. This would render it pointless. So, ensure you check the number of days it takes for the request to pause the SIP to be processed, and go ahead accordingly.
Once you decide to pause SIP, the next question is, "how to pause mutual fund SIP?" You can pick one of 3 possible ways. You can fill a physical copy of the application form and submit it to your bank or fund house. The second option is to email your bank or fund house to request to pause the SIP. The third and easiest way is to pause SIP payments through your bank or AMC's mobile app or website.
For those who are wondering, "how to pause SIP online?", simply click here and you will be directed to the digibank app for the next steps.
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