What occurs if a SIP in a mutual fund programme is stopped 2023?

Mutual fund investments can be made using either a flat sum or a systematic investment plan.

A recurring investment of a set amount in a mutual fund scheme is done through a SIP (Systematic Investment Plan). An investor can build up a sizable fund for his future family needs by investing little amounts over time and benefiting from capital growth.

Investors occasionally wonder what happens to the existing fund after the SIP in a mutual fund programme stops, whether it continues to gain money, etc. The following points address a number of these questions:

For the time period he chooses, the investor’s bank account will automatically be debited with the SIP amount. However, a number of circumstances could arise that would force an investor to halt their SIP investment. The causes could be anything from irregular income to rising costs to urgent requirements.

All mutual fund schemes enable investors to halt SIPs whenever necessary and without incurring fees or penalties. An SIP can often be stopped 30 to 45 days after the investor first makes the request. Future purchases in the scheme cease once the SIP is terminated, and the investor’s bank account is not automatically debited. The money that has already been invested stays there and increases over time.

The 1-What effect if SIP in a mutual fund programme is stopped?

Depending on the frequency of the SIP, the SIP payment is immediately withdrawn from the investor’s bank account when a SIP is registered on a monthly, weekly, or annual periodic basis. Future purchases made under the scheme are halted as a result of SIP Stop canceling this auto deduction.

2- Can a SIP that has been stopped ever be restarted?

Yes, after stopping a SIP, an investor can renew it whenever they want with the same amount or a revised amount in the same scheme.

3- Do SIP Stop charges or penalties apply to investors?

In a plan, there aren’t any fees or penalties associated with discontinuing a SIP. It is an entirely cost-free service.

4- Does SIP automatically redeem the money invested when it stops?

No, the SIP stop merely ends the subsequent bank account auto debit. The sum that has already been invested continues to work for the scheme.
Any investor who wants to redeem their investment must make a separate request to the fund house.

A select number of investment schemes, such as Equity Linked Savings Schemes, have lock-in periods (ELSS). In such plans, the investor may redeem the amount equating to the value of free units (Units that are not subject to a lock-in term) as needed.

5- What happens to the money that has already been invested after discontinuing the SIP ?

Units are given to the investor when a SIP amount is invested in a programme. The units that have already been allocated to a SIP stay invested and continue to perform in line with the scheme’s securities even after the SIP is halted.

The following real-world example can help you understand this.

In July 2015, an investor began a SIP of Rs. 7000 per month in the ICICI Balanced Advantage fund. They discontinued in July 2017. In this way, he contributed Rs. 1,75,000 to the scheme up until July 2017, and 6350.643 units were distributed as a result.

Findings from the above:

1. The investor made a SIP investment of Rs. 7000 on the 25th of each month.

2. The investor discontinued the SIP on July 14th, 2017, and it was cancelled as of August 24th, 2017, as indicated. It took 40 days for the SIP to be terminated, and the SIP instalment that was due on July 25, 2017, was properly taken out.

3. The statement contains no charges or penalties.

4. As of the declaration date (18 April 2022), the 6350.643 units allocated against investments made up to July 2017 remained the same.

5. As of April 18, 2022, the investment is worth Rs. 3,14,674. This number of 3,14,674 is the result of multiplying the current 6350.653 Units by the NAV as of the date 49.55. In other words, the units stay the same, but the fund’s NAV continues to grow. As a result, the value of the assets likewise increases.

6. The folio is open, and the investor may redeem funds at any moment up to the value of their assets.

Things to keep in mind:

1. SIP should be halted whenever there is a liquidity crisis or other financial emergency because it is a disciplined investment tool.

2. If an investor must discontinue their SIP for whatever reason, they shouldn’t redeem their initial investment if they don’t have to because it will continue to increase over time.

3. Investors should keep in mind that it will take 30-45 days for a SIP to terminate when they decide to stop one. Therefore, SIP funds should be kept on hand in the bank account in case there are any payments due between the deadlines.

Conclusion

Stopping a SIP is a step taken to halt future scheme investments. This facility is a mechanism created to provide investors the ability to cease investments at any time for any financial or liquidity issue. The investor is not subject to any penalties. The invested amount continues to perform in line with the performance of the scheme’s securities and may be redeemed by the investor as needed.