I got this comment about SIPs the other day, and it had some interesting questions that I thought Iâ€™d address here.
Can I cancel my SIP midway?
Say you take out a SIP for 36 months, but want to stop it in only 3 monthsÂ – can you do that? Will any penalty be imposed on you?
Yes, you can cancel your SIP midway, and no â€“ there wonâ€™t be any penalty imposed on you.
The way in which you take out the SIP and the fund house will determine how long it takes for the cancellation to take effect.
If you have sent post â€“ dated checks to the mutual fund, you will need to fill up a SIP cancellation form (like this one), and send it to them to return your remaining checks.
They might take anywhere from 2 â€“ 4 weeks to cancel your systematic investment plan, and return your checks to you.
If you have gotten into an SIP online with someone like ICICI Direct, you can log in to your account, and cancel the request online. Iâ€™d imagine that this is quicker, but I really donâ€™t know for sure.
Can I change the amount of my SIP midway?
Now if you can cancel your SIP midway, then that in fact allows you to cancel the one that is already going on, and set up a new one with a different amount. If you have set up a SIP using post dated checks then I canâ€™t imagine how youâ€™d change the amount mid way. I couldnâ€™t find any information about changing the amount of a SIP midway even in the case of online trading so I donâ€™t know for sure what happens.
So, Iâ€™d say that for sure you can change the amount by canceling the old one, and starting up a new one, but can you modify your existing SIP â€“ I donâ€™t know that.
Can I continue a SIP after it ends?
If I take out a SIP for 36 months, and at the end of that time period want to continue for 3 more years â€“ will I have to start a new SIP or can I continue a new one?
If you have started this by issuing post dated checks then you can issue more checks and get the thing going for you again. If you have used an online platform then this post explains how to set one up.
Again, I am not sure if you can just continue the existing one or not, but the effect is much the same. The commenter referred to losing the benefits of compounding but I am not sure what he was referring to. You wonâ€™t lose anything if you start a new one, it will work just like the one that you got out of.
These were some interesting questions, and Iâ€™d love to hear if any of you have any practical experience cancelling or modifying a SIP?
If you have any other questions or observations, leave a comment, and we can explore those too.