Systematic investment plan (SIP) is a popular way to invest in mutual funds. It allows investors to invest a fixed amount of money at regular intervals, such as monthly or quarterly. This is a disciplined and convenient way to invest, and it can help investors to achieve their financial goals over the long term.
However, there may be times when investors need to pause their SIPs. This could be due to a number of reasons, such as a financial setback, a job loss, or a change in personal circumstances.
SIP pausing is a facility offered by many mutual fund houses that allows investors to temporarily stop their SIPs for a period of time. This can be a useful tool for investors who need to take a break from investing, without having to cancel their SIPs altogether.
When an investor pauses their SIP, the mutual fund house will stop debiting the fixed amount from their bank account at regular intervals. However, the investor will continue to remain invested in the mutual fund scheme, and their units will continue to grow.
Investors can resume their SIPs at any time, and they will not be charged any penalty for pausing their SIPs. However, it is important to note that pausing one’s SIP for a long period of time can have an impact on the investor’s overall returns.
This article will explore the SIP pausing facility in more detail, and discuss the benefits and drawbacks of pausing one’s SIPs. It will also provide some tips for investors on how to use the SIP pausing facility effectively.
Why might an investor want to pause their SIP?
There are a number of reasons why an investor might want to pause their SIP:
- Financial setback: If an investor experiences a financial setback, such as a job loss or a medical emergency, they may need to pause their SIPs in order to free up some cash.
- Change in personal circumstances: If an investor’s personal circumstances change, such as getting married or having a child, they may need to pause their SIPs in order to adjust their budget.
- Market volatility: If the market is experiencing a lot of volatility, an investor may want to pause their SIPs until the market stabilizes.
What are the benefits of pausing one’s SIPs?
There are a few drawbacks to pausing one’s SIPs:
- Missed investment opportunities: If an investor pauses their SIPs during a market downturn, they may miss out on the opportunity to buy units at lower prices.
- Impact on returns: Pausing one’s SIPs for a long period of time can have an impact on the investor’s overall returns.
- Difficult to restart: Once an investor pauses their SIP, it can be difficult to restart it, especially if their financial situation has not improved.
How to use the SIP pausing facility effectively
Watch this video for detailed information:
If you are considering pausing your SIPs, it is important to do so wisely. Here are a few tips:
- Only pause your SIPs if you need to: Do not pause your SIPs unnecessarily, as this can have an impact on your overall returns.
- Set a time frame: Decide for how long you want to pause your SIPs. It is best to pause your SIPs for a short period of time, such as 3-6 months.
- Restart your SIPs on time: Once you have reached the end of the pause period, be sure to restart your SIPs immediately.
- Review your financial situation regularly: Review your financial situation regularly to see if you can afford to resume your SIPs.
SIP pausing is a useful tool for mutual fund investors. It allows investors to take a break from investing when they need to, without having to cancel their SIPs altogether. However, it is important to use the SIP pausing facility wisely, and to avoid pausing one’s SIPs unnecessarily.