How to Redeem and Cancel Your SIP (Mutual Funds) Online

Learn how to effortlessly redeem or cancel your SIP with our step-by-step guide.
Redeem or Cancel Your SIP
4 mins
07 Feb 2024

There are multiple reasons why you may want to redeem or cancel your Systematic Investment Plan (SIP). These could include external factors like market fluctuations and volatility or personal reasons like the need for funds to make immediate payments, amongst others. At such times, making a decision based on your needs is essential. To understand whether you should redeem or cancel the best SIP in India, you need to understand the difference between the two. Read on to make an informed choice.

What is a Systematic Investment Plan (SIP)?

A Systematic Investment Plan (SIP) is a disciplined and convenient approach to mutual fund investing, designed to help individuals build wealth systematically over time. In a SIP, investors commit to investing a fixed amount at regular intervals, typically monthly. This investment strategy is particularly attractive for those looking to enter the financial markets without the need for a large lump sum. SIPs offer flexibility, allowing investors to choose the amount they want to invest in each installment, making it accessible to a wide range of investors with varying financial capacities.

The core principle behind SIPs is the concept of rupee cost averaging, a strategy that helps mitigate the impact of market volatility. When markets are high, the fixed investment amount buys fewer units, and when markets are low, more units are purchased. This systematic approach not only eliminates the need for trying to time the market but also ensures that investors accumulate more units when prices are favorable, contributing to the long-term growth of their investment portfolio. SIPs are well-suited for individuals with different financial goals, providing a disciplined and effective way to create wealth over the long term.

Understanding mutual fund redemption

The concept of redemption takes on various meanings. In finance, redemption refers to the repayment or refund of securities for a fixed return either during or prior to the asset's maturity date. Beyond finance, redemption also encompasses the redemption of coupons and gift cards, which consumers may exchange for products and services. Common examples of securities subject to redemption include bonds, certificates of deposit (CDs), Treasury notes (T-notes), and preferred shares.

Mutual fund redemption involves a crucial decision-making process influenced by market conditions. Investors must remain proactive and make informed choices based on the prevailing market scenario. Conducting thorough market research and assessing the fund's performance and reasons for potential redemption are essential steps. Often, investors may feel compelled to redeem their units if they perceive their fund's performance is faltering or if the market sentiment turns negative. Despite market volatility, opportunities may arise for investors to capitalise on potential returns.

Navigating the mutual fund redemption process requires careful consideration and analysis to maximise investment outcomes amidst fluctuating market conditions. Understanding the implications of mutual fund redemption, including potential tax implications, is integral to making informed financial decisions.

How to redeem your SIP investment in mutual funds

Redeeming your SIP is simply withdrawing your investment to raise money to meet interim or urgent needs. Here, you only sell a part of your investment and not all of it. This means that your SIP is still active even after you redeem held units. The following month, your SIP will continue to purchase units.

If you have bought mutual funds through an AMC (Asset Management Company), you can sign into their portal with your ID and password to perform transactions and redeem money at your convenience. Also, you can request redemption offline by visiting the AMC office and filling up a redemption form.

Ensure that the form is filled with accurate details and has your signature on it. If your form has any discrepancies or your signature does not match your records, your request will get rejected, causing further delay. After submitting your request, you will receive your redemption amount via NEFT or a cheque mailed to your address. You can redeem your SIP similarly even if you have invested via other portals.

If you have purchased your SIP with your Demat or trading account, you will receive an e-pay out to the bank account registered with that account. You will need to submit a redemption request to do the same.

If you hired an agent to invest in SIPs, contact the same agent to redeem it. They will fill up a redemption request with details regarding your SIP, including the number of units that you want to redeem. You will receive the due amount via NEFT or a cheque after the process has been completed.

You can also use Computer Age Management Services (CAMS) to redeem your SIP. Download the redemption form, fill it and submit it at a CAMS office. These requests cannot be cancelled, altered or revoked. However, if you have SIPs with multiple companies, opting for this method is beneficial as it serves as a single point of contact for all your redemption requests.

Frequently Asked Questions

Can an investor stop all the SIPs at the same time?

Yes, an investor can choose to stop all their SIPs simultaneously.

How long does it take to redeem SIP?

The time taken to redeem your SIP investment can vary depending on the mutual fund house or financial institution. In most cases, SIP redemptions are processed within 3 to 7 business days.

Is there any penalty charged for canceling a SIP?

Cancellation of a SIP typically does not incur a penalty. SIPs offer flexibility, and investors can stop their SIPs at any time without facing a penalty. However, it's essential to be aware that if you redeem your SIP units before the completion of the SIP tenure, you may be subject to exit loads or other charges, depending on the terms and conditions of the specific mutual fund scheme. These charges can vary among different fund houses and schemes, so it's important to review the fund's offer document for details on any applicable exit loads or penalties.

Can I cancel my SIP online?

Yes, most mutual fund companies or brokers offer online platforms for SIP cancellations through their websites or mobile apps. You can usually log in, select the SIP you wish to cancel, and follow the provided instructions.

Can I cancel my SIP anytime?

Yes, you can cancel your SIP at any time without specific restrictions.

What if I cancel my SIP before maturity?

Canceling your SIP before maturity simply means that you are discontinuing future investments. It does not affect the units you have already purchased through your existing SIPs, and they continue to be part of your investment portfolio.

When should I stop my SIP?

You can stop your SIP at any time, depending on your financial goals and needs. Common reasons to stop include achieving your investment objective, financial constraints, or a change in investment strategy.

Can I restart SIP after cancellation?

Yes, you can restart your SIP after cancellation. If you have canceled your SIP due to temporary financial constraints or other reasons, you can initiate a new SIP in the same or a different mutual fund scheme when you are ready to invest again.

If I cancel my SIP will I get a refund?

No, cancelling your SIP doesn't entail a refund of the invested amount; it stops future investments.

Will SIP continue after redemption?

No, once you redeem your SIP, it ceases to continue, and no further investments are made.

Will I get my money back if I cancel my SIP?

No, cancelling your SIP doesn't result in immediate return of invested money; it stops future investments.

Can I stop SIP without redeeming?

Yes, you can stop SIP without redeeming, halting future investments while leaving existing investments untouched.

What happens if I delete SIP?

Deleting SIP essentially stops future investments; it doesn't affect existing investments or entail immediate refunds.

How much time does it take to cancel SIP?

Cancelling SIP typically takes a few business days, depending on your mutual fund provider's processing time.

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