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How to Cancel Mutual Fund SIP?

This blog emphasises the importance of careful consideration when temporarily cancelling Mutual Fund SIPs. While it offers flexibility, potential drawbacks include disrupting compounding, timing market fluctuations, and delaying financial goals.
 

Investing in Mutual Fund Systematic Investment Plans (SIPs) is a smart way to build wealth over time. However, life is unpredictable, and circumstances may arise where you need to adjust your financial commitments.

Cancelling a Mutual Fund SIP might seem daunting, but it can be a straightforward process with the right knowledge. This blog will walk you through the steps, ensuring you understand the implications and have the tools to make informed decisions.

Whether it's due to changing financial goals, unforeseen expenses, or simply a shift in investment strategy, knowing how to cancel a Mutual Fund SIP empowers you to take control of your financial journey.

5 Common Reasons Why Investors May Pause or Cancel Online Mutual Fund SIP
 

Investors embark on the Mutual Fund Systematic Investment Plan (SIP) journey with long-term financial goals. However, life's uncertainties and evolving circumstances often lead them to consider pausing or cancelling their SIPs.

Here are five common reasons why investors may choose to take this step:
 

  • Financial Hardships

     

    Unexpected financial challenges such as job loss, medical emergencies, or unforeseen expenses can strain one's budget. In such cases, investors may need to redirect funds towards immediate needs, necessitating a temporary pause or cancellation of their SIPs.

  •  

  • Re-evaluation of Financial Goals

     

    As time progresses, an investor's financial goals may evolve. They might decide to prioritise different objectives, such as purchasing a home, funding education, or preparing for retirement. Adjusting or cancelling SIPs allows them to reallocate resources accordingly.

  •  

  • Market Volatility

     

    Periods of market volatility can cause apprehension among investors. Some may temporarily halt their SIPs to avoid investing during uncertain times. This provides an opportunity to observe market trends and make more informed decisions.

  •  

  • Alternative Investment Opportunities

     

    Investors might come across alternative investment avenues that align better with their financial strategy. This could include opportunities like real estate investments, fixed-income securities, or starting a business. Pausing or cancelling SIPs frees up capital to explore these options.

  •  

  • Achievement of Financial Milestones

     

    When investors reach significant financial milestones, such as paying off a major debt or receiving a windfall, they may reassess their investment strategy. This might involve reallocating funds or redirecting resources towards other financial objectives.

How to Stop Mutual Fund SIP Temporarily (Or Should You Pause It?)
 


Pausing your SIP temporarily is a prudent alternative to outright cancellation. When you're ready to resume investing, it can be easily reinstated.
 

Follow these streamlined steps:
 

  • Access your mutual fund account through the company's website or app.
  • Head to the 'SIP' section.
  • Select the specific SIP you wish to temporarily halt and click on the 'Pause' or 'Stop' option.
  • Confirm your request by providing essential details, such as the reason for the pause and the duration you'd like it to be in effect.
  • After submitting the request, your SIP will be temporarily suspended.


    Alternatively, you may issue your bank a 'stop payment' directive.


    However, it's crucial to note that if the 'stop payment' or low balance persists for over two months, the Asset Management Company (AMC) will cancel the SIP. This may result in a missed or briefly interrupted instalment.


    Therefore, it's advisable not to halt or skip SIP payments for an extended period, especially if permanent cancellation is not your intention. Maintaining regularity in payments ensures the stability and effectiveness of your investment strategy.

SIP Cancellation Online – 3 Ways Mentioned!

Cancelling or temporarily halting your mutual fund SIP online is a straightforward process with various options available.

Here's a step-by-step guide on how to do it effectively:

Through the AMC website

  • Begin by visiting the mutual fund's official website, where your active SIP is.
  • Log in using your designated credentials.
  • Identify the ongoing SIP you wish to cancel and select the "Cancel SIP" option.
  • The SIP will be discontinued within 21 working days.

Through an Agent

If your SIP was facilitated through an agent, simply inform them of your decision to cancel. The agent will then request a cancellation with the relevant AMC on your behalf.

Through an Online Distributor Platform

If you opted for an SIP through an online distributor platform, access the mutual fund website associated with the distributor or agent. Select the specific SIP instruction that requires termination and then click on the "Cancel/Stop" SIP option.

How to Cancel Mutual Funds SIP Offline?

There are a couple of straightforward approaches when it comes to discontinuing a mutual fund SIP offline. You can notify your bank and the respective Asset Management Companies (AMCs). Alternatively, you can contact your appointed agent, who can assist in cancelling your mutual fund SIPs.

Here's a step-by-step guide for cancelling a mutual fund SIP offline:
 

  • Contact your asset management firm to request a SIP cancellation form.
  • Complete the form with all the necessary details, including the date you wish to terminate your plan.
  • Submit the filled SIP cancellation form at any of the AMC branches.
     

Typically, the cancellation process takes between 14 to 21 days.

However, some fund houses might expedite the process. It's essential to ensure no SIP deposit deadlines within this period.

Negative Impacts of Temporarily Halting Mutual Fund SIPs

Temporarily cancelling Mutual Fund Systematic Investment Plans (SIPs) can negatively impact an investor's financial portfolio.
 

  • It disrupts the power of compounding, a crucial factor in long-term wealth accumulation. When SIPs are halted, the potential for exponential growth through reinvested earnings is lost, as the invested capital isn't allowed to grow over time.
  • Market timing risks come into play. Pausing SIPs might inadvertently lead to missed opportunities for purchasing units at lower prices during market downturns. This could result in a higher average acquisition cost when the investor resumes the SIP, potentially impacting overall returns.
  • Temporary cancellations may hinder achieving financial goals within the originally projected timeline.
  • Whether it's saving for a child's education, buying a home, or retirement planning, delays in contributions can lead to a shortfall in the targeted corpus.
  •  Investors may feel detached from their financial goals, potentially leading to emotional decision-making.They might be tempted to react impulsively to short-term market movements, which could ultimately undermine their long-term objectives.
  • Considering any exit loads or penalties associated with temporarily cancelling SIPs is important.Some funds may impose charges for discontinuing SIPs before a specified tenure, which could erode a portion of the invested capital.

Conclusion
 

In the realm of investments, the decision to temporarily cancel a Mutual Fund SIP is consequential. While it offers flexibility, it's crucial to recognise the potential drawbacks. Critical considerations include disrupting compounding, timing market fluctuations, and delaying financial goals.

Additionally, emotional impacts and associated charges underscore the need for a thoughtful approach. Always consult a financial advisor before taking this step.

Striking a balance between adaptability and consistency ensures a resilient investment plan that aligns with your long-term aspirations.

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance

Frequently Asked Questions (FAQs)

Can I pause my SIP indefinitely?

While you can temporarily pause your Mutual Fund SIP, it's important to note that most fund houses have a maximum allowable pause period, typically 6 to 12 months. Beyond this period, the SIP may be automatically cancelled. Always check with your specific fund house for their policy on SIP pauses.

Will stopping my SIP impact my long-term returns?

Yes, temporarily stopping your SIP can impact your long-term returns. It interrupts the power of compounding and may lead to missed opportunities in market downturns. Additionally, delays in contributions could result in a shortfall in your targeted financial goals.

Are there any charges associated with pausing a SIP?

While there are generally no charges for temporarily stopping a Mutual Fund SIP, it's important to be aware of any exit loads or penalties that may apply if you choose to cancel the SIP entirely. Always review the terms and conditions of your specific fund before making any decisions.

Disclaimers

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not guaranteed issuance plans, and they will be subject to the Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and does not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication. However, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • ULIP
    • IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER
    • THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.
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    • Please make your own independent decision after consulting your financial or other professional advisor.