Investing in mutual funds through systematic investment planning (SIP) has been gaining momentum for the past few years. Through systematic investment planning, investors get to invest in mutual funds, a fixed amount with regular intervals. These mutual fund schemes are either in equities, debt or a combination of debt or fixed income securities, under debt mutual funds. For instance, under debt mutual funds, deposits are generally invested in Corporate Bonds, Treasury Bills, Money Market instruments, Government Securities, and other securities.
Under SIP, investors can also customize according to needs and requirements. For instance, under SIP one has the option to choose from making payments daily, weekly, monthly, quarterly, or yearly. It also offers an array of flexible options, such as one can start SIP for an additional amount or cancel an existing SIP and again start a new one.
SIP follows The Rupee Cost Averaging method, and it helps investors to average his/her purchase cost and maximize returns.
Having said so, there have been times when every one of us have missed one or two SIP instalments. In case you face such a situation where you cannot pay SIP instalments because of any financial crunch, note that the AMC will not cancel the SIP or penalise you for missing one or two SIP instalments.
Mutual fund houses cancel the SIP only if an investor misses SIP instalments for 3 consecutive months. However, banks could penalise the investor for dishonouring the auto-debit payments.
Investing in mutual funds through SIP helps investors attain long-term financial goals. It is a mutual fund facility where any investor invests fixed amounts regularly in a mutual fund scheme.
Additionally, some AMCs to help an investor in crisis, offer the ‘SIP pause’ facility with a tenure ranging from 1 month to 6 months. Hence, the investor can pause SIP instalments for a few months and restart them again after he/she is financially comfortable.
Industry experts say, if investors are irregular with SIP instalments, they will not only accumulate lower wealth but also fail to attain long-term financial goals. Hence, financial planners suggest one must try to set aside at least 3 to 6 months of SIP instalments in an emergency fund to meet a financial crunch.