SIP: What happens if you accidentally miss your SIP installment? Will you incur a penalty or will your investment be cancelled?

SIP has become a preferred method for investors these days, as it allows you to build a large corpus even with a small amount. However, sometimes, SIP installments are missed due to unexpected expenses, low bank balances, or auto-debit issues.

People often wonder what difference a single installment will make, but the reality is that missing a SIP can disrupt your entire financial plan. Furthermore, consistently missing installments can lead to the SIP being canceled and the bank charging a separate penalty. Therefore, it's important to understand the true impact of missing a SIP and how to avoid it.

What happens if you miss a SIP?

Missing a SIP doesn't stop your investment, but if you miss three consecutive installments, the AMC can cancel your SIP. The disadvantage of missing a SIP installment is that you won't be able to purchase new units that month, but it won't affect the purchase of existing units. If you maintain sufficient balance in your account before the next SIP date, your investment will automatically resume.

Banks May Charge Penalties

The mutual fund company will not charge you a penalty if you miss a SIP installment. However, banks may charge a penalty for an insufficient balance in your account. In this case, the bank may charge between ₹150 and ₹750, depending on the bank's rules.

Impact on Financial Goals
Missing a SIP installment may not cancel your SIP, but it can certainly impact your financial goals. This way, you lose the opportunity to practice rupee-cost averaging based on market movements. Each missed SIP reduces the invested amount, which impacts the power of compounding over time and your corpus. Intermittent investments prevent goals from being achieved on time. In such a situation, you may have to make a large investment in the future to achieve your financial goals.

How to avoid missing a SIP?
Set a SIP date immediately after your salary.
Start a SIP with a small amount.
If a large SIP is difficult, start with 3-4 smaller SIPs.
Use the SIP Pause option if needed.
Keep a little more than the minimum balance in the bank so that the SIP can be deducted smoothly.

What happens if the SIP is cancelled?
If an SIP is cancelled due to missing three consecutive installments, the future auto-debit facility will be discontinued, but your money will remain invested in the mutual fund units you have already invested in. The value of these units will fluctuate depending on the fund's performance. If you wish to restart a cancelled SIP, you can do so, but this may require filling out a new registration form and completing all the paperwork again.

Disclaimer: This content has been sourced and edited from Dainik Jagran. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.