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SIP Investing - How to Start, Manage & Optimise Your SIP
In summary
Cancelling an SIP and redeeming your mutual fund investment are two different actions. Cancelling stops future SIP instalments, while redemption withdraws some or all of your existing units.
- You can cancel an SIP without automatically redeeming the units you have already purchased.
- You can redeem some or all of your mutual fund units without cancelling your SIP separately.
- SIP cancellation requests can be made through your AMC, investment platform, or applicable registrar.
- SEBI-related timelines require active SIP cancellation to be processed within 2 working days, subject to the applicable process.
- Exit loads or taxes may apply when you redeem units, depending on the scheme, units redeemed, and applicable rules.
If your financial situation has changed temporarily, you may consider pausing your SIP where the scheme or platform offers that facility. For a permanent change, cancellation may be more appropriate.
What is a Systematic Investment Plan (SIP)?
A Systematic Investment Plan, or SIP, is a method of investing in mutual funds where you invest a fixed amount at regular intervals, such as monthly. Instead of investing a large amount at one time, an SIP allows you to build your investment gradually.
Each SIP instalment is used to purchase mutual fund units based on the scheme’s applicable NAV on the transaction date. Since markets move over time, investing regularly can help spread purchases across different market levels through rupee-cost averaging.
For example, if you invest Rs. 5,000 every month, each instalment buys units based on the NAV applicable on that date. The number of units purchased may differ when NAV changes.
Should you pause or cancel your SIP?
Before closing your SIP, consider whether you need a temporary break or a permanent stop. The right choice depends on your financial situation and investment goals.
A pause may be suitable when you are facing a short-term cash flow issue but want to continue investing later. Cancellation may be considered when your financial goals, income situation, or investment strategy have changed.
The difference between the two options is:
| Option | What happens |
|---|---|
| Pause SIP | Future instalments stop temporarily and can restart later, depending on scheme and AMC rules |
| Cancel SIP | Future instalments stop permanently until you create a new SIP |
| Redeem investment | Existing mutual fund units are sold and money is paid to your bank account |
Stopping an SIP does not automatically mean your existing investment is withdrawn.
How to close SIP online?
You can close an SIP online through your AMC website, mutual fund platform, or other investment platforms where your SIP is registered.
Follow these general steps:
- Log in to your mutual fund account or investment platform.
- Open your mutual fund section and select the active SIP you want to stop.
- Choose the option to cancel or stop the SIP.
- Confirm the cancellation request and submit it.
- Wait for the AMC or platform to process the request.
The processing time may vary depending on the AMC, platform, and SIP mandate. Submit your request before the next instalment date to avoid an additional debit.
How to cancel SIP offline?
You can also cancel an SIP by submitting a physical request form.
The usual process involves:
Obtain the SIP cancellation form
Download the form from the AMC website or collect it from an AMC branch or registrar and transfer agent (RTA) office.
Fill in the required details
Provide details such as:
- PAN details
- Folio number
- Mutual fund scheme name
- Bank account details
- SIP registration details
Ensure that the information matches your investment records to avoid processing delays.
Submit the completed form
Submit the form at the AMC branch or authorised RTA office. After verification, the SIP cancellation request will be processed according to the applicable process timelines.
What happens after you close your SIP?
When you close an SIP, only future instalments are stopped. The mutual fund units you have already purchased remain in your folio.
Your existing investment value will continue to change based on the NAV movement of the mutual fund scheme. If you want to withdraw the invested amount, you need to submit a separate redemption request.
For example, if you invested Rs. 5,000 every month for two years and then cancel your SIP, the units purchased during those two years remain invested. Cancelling the SIP only stops future Rs. 5,000 monthly contributions.
When to cancel SIPs?
Investors may stop SIPs for different personal and financial reasons. Some common reasons include:
Change in financial priorities
A change in income, expenses, or financial goals may require investors to redirect their money towards other needs.
Temporary cash flow problems
Unexpected expenses, income changes, or emergencies may make it difficult to continue monthly investments.
Change in investment goals
An investor’s objectives may change over time. A scheme selected earlier may no longer match the updated goal or investment horizon.
Reviewing fund performance
Investors may review a mutual fund if its performance does not align with their expectations over a suitable period. However, decisions should consider factors beyond short-term returns.
What is the difference between closing SIP and redeeming mutual fund units?
Closing an SIP and redeeming mutual fund units are two different actions.
Mutual funds allow investors to redeem units when they want to withdraw money from their investment. Redemption means selling some or all units held in a mutual fund scheme.
The difference is:
| Action | Meaning |
|---|---|
| Close SIP | Stops future investments |
| Redeem units | Withdraws money from existing investment |
| Pause SIP | Temporarily stops future instalments |
You can close an SIP and continue holding your existing units. Similarly, you can redeem units while keeping an active SIP, unless you cancel it separately.
Can an SIP be restarted after cancellation?
Yes, you can start a new SIP in a mutual fund scheme after cancelling an earlier SIP, subject to applicable procedures.
If your financial situation improves after a temporary pause or cancellation, you can review your investment plan and decide whether restarting an SIP aligns with your goals.
Use an SIP calculator before making investment decisions
An SIP calculator can help you estimate how your investments may grow over a selected period.
You generally need to enter:
- Monthly investment amount
- Expected annual return
- Investment duration
The calculation provides an estimated future value based on the details entered. It can help you compare different investment scenarios and review whether stopping your SIP may affect your long-term financial goals. However, it is only an illustration and does not guarantee actual returns, as mutual fund returns depend on market conditions.
What should you check before cancelling an SIP?
Before cancelling an SIP, review the following points:
- Investment goal: Check whether stopping the SIP affects your planned financial goal.
- Existing units: Cancelling the SIP does not remove your existing mutual fund units.
- Exit load: If you redeem units after cancellation, exit load may apply depending on the scheme rules.
- ELSS lock-in: ELSS investments have a three-year lock-in period for each SIP instalment. Cancelling the SIP does not remove this requirement.
- Alternative options: Consider whether pausing the SIP may address a temporary financial challenge.
Concluion
Closing an SIP is a decision that should match your financial situation and investment goals. Stopping an SIP only ends future instalments, while your existing mutual fund units continue to remain invested unless you redeem them separately. Before cancelling, review whether pausing the SIP can address a temporary need or if a permanent change is required. Understanding the process, possible impacts, and available options can help you manage your mutual fund investments better.
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Frequently Asked Questions
Managing SIP cancellation
SIP pause and cancellation timeline
SIP redemption and charges
Can an investor stop all the SIPs at the same time?
Yes, investors can request to stop multiple SIPs, but separate cancellation requests may be required depending on the AMC or platform.
How long does it take to redeem SIP?
SIP redemption timelines depend on the mutual fund scheme and processing rules. The redemption amount is credited to your registered bank account after processing.
Is there any penalty charged for canceling a SIP?
Generally, there is no separate SIP cancellation penalty. However, exit load may apply if you redeem units based on scheme rules.
What if I cancel my SIP before maturity?
Cancelling an SIP stops future investments but does not affect existing units. ELSS SIP instalments remain subject to their three-year lock-in period.
Can I restart SIP after cancellation?
Yes, you can start a new SIP after cancellation, based on your investment goals and the applicable AMC or platform process.
Can I stop SIP without redeeming?
Yes, cancelling an SIP only stops future instalments. Existing mutual fund units remain invested until you choose to redeem them.
How much time does it take to cancel SIP?
SIP cancellation time depends on the AMC or platform. Submit the request before the next instalment date to avoid additional debits.
Can a SIP be paused temporarily instead of cancelling it?
Yes, some AMCs allow temporary SIP pauses. This can help manage short-term cash flow issues without permanently stopping investments.
Can an SIP cancellation request be reversed after submission?
A cancellation request may not always be reversed after processing. Contact your AMC or platform immediately to check available options.
Disclaimer
Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319
BFL does NOT:
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In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.
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Disclaimer
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The information BFL contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.
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Disclaimer
Mutual Fund SIP calculator may provide potential investors an approximate estimate on the maturity amount of the monthly SIP, purely based on mathematical calculation of the projected annual return rate selected by investor. However, such calculation does not factor the actual performance by the Asset Management Company (AMC) and should not be treated as any advice or assurance about the actual return of investment. Mutual Funds do not have a fixed rate of return and it is not possible to predict the rate of return. Please note that the SIP calculator are for illustrations only and do not represent actual returns which may vary depending on various factors including but not limited to actual performance, expense ratio, taxation, exit load (if any), etc.