Mutual funds sahi hai, but in the year of job loss and disturbed finances, inconsistency in investment is a common problem. A systematic investment plan (SIP) is a way of making an investment in a market-linked product, a mutual fund. SIP is famous among investors who do not have time to invest in individual stocks but are willing to gain the benefits of compounding through markets.
How does SIP work with your bank?
In SIP, you invest a particular amount of money in regular intervals, disciplinarily. To keep themselves free from making investments manually, investors usually opt for an auto debit option from their bank account. In such a case, the chosen amount of SIP will be deducted from your bank account every month, quarter, or year, as the case may be. This mandate can be done through your banker by using ECS, an electronic clearing system.
What is missing SIP?
Missing your SIP means that you do not have enough funds in your bank account that is attached to your mutual fund SIP auto debit mandate. In such a case, your bank will not be able to debit the amount of SIP at the pre-decided date of regular intervals.
It does not have to do anything with the AMC from which you have invested in. ECS is the system of banks that provide you the facility of auto debit on a particular date.
Who charges the penalty?
As we all know that auto debit has nothing to do with your asset management company, so clearly they would charge you for missing a SIP. The banks have their own set of charges on the rejection of ECS, which varies from ₹150 to ₹750.
Similarly, if you do not maintain the minimum balance required by the banks, banks charge you a penalty, which differs from bank to bank. In the case of missing your SIP as well, you need to pay charges for not maintaining the balance due to which you missed your SIP on the date.
What should an investor do?
To save your money on penalty, you can pause your SIP with the help of your assets management company. If you know that you will not be able to pay your SIP next month, or next interval, you can simply ask your fund manager to pause your investment for up to a particular period of time so that your bank will not charge any penalty for missing the SIP.
Pausing your SIP doesn’t mean that you are withdrawing from the schemes or exiting the market. It simply means that your fund will stay invested in the scheme, and only your further payments will get stopped. You do not have to pay an exit load or withdraw your money.
Personal financial management is always about estimating your future financial conditions and making appropriate decisions that save your money instead of becoming a burden to your finances. Always choose the right way to manage your money.
Anushka Trivedi is a freelance financial content writer. She can be reached at anushkatrivedi.com
