Mumbai: Please don’t break the SIP habit if you can: That’s the clear message from the mutual fund industry that’s now allowing savers to hit the pause button, but is urging them to do so only in case of job loss or a substantial fall in the income.
Many savers are faced with salary cuts and loss of income with uncertainty on when things will get back to normal. Such investors who want a break from their SIPs due to income shrinkage could pause their systematic investment plans (SIPs) for some time.
This facility can be used once in the lifetime of an SIP and is now offered by all fund houses. Investors who have an SIP registered through the physical mode can log into the fund house website, and request the fund house to pause their SIP for 3-6 months. They can also send an email to the fund house from their registered email ID, mentioning their folio number along with the start and end dates.
“Only people with issues of cash flows should opt for the pause option,” said Swarup Mohanty, CEO, Mirae Asset Mutual Fund.
A fall in the equity markets helps a long-term investor using the SIP route as s/he can accumulate more units with the same amount of money.
Financial planners caution investors against randomly using this facility and believe investors should use this only if there is a dent in their monthly income. Many investors randomly want to stop SIPs as they are worried about the sharp fall and subsequent volatility after Covid-19.
“Investors who pause SIPs in times like these when the market has fallen will lose the advantage of rupee cost averaging, as they will deviate from their goal by a wider margin,” said Viral Bhatt, a Mumbai-based financial planner.