SIP Investment: Missing an Instalment – Axis Direct
May 28, 2018 | Source: Investopedia.in
What happens when you miss an SIP instalment?
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 installments. The fund house doesn’t penalize you for missing an SIP installment, but if it happens continuously for three times, it would cancel your SIP.
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.
How to make up for it?
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 installment when the markets are in the bad phase you will lose an opportunity to buy a higher number of units.
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. This will help you to create the targeted corpus without any difficulty.