Missed an SIP Installment? 5 Common SIP Myths Debunked for Beginners

If you’re a beginner buying SIP online, you must have come across the following myths regarding what happens when you miss an SIP or pause it. Let’s debunk each to find out the truth:
 

Myth 1: There is a penalty for missed SIPs

Fact: Mutual fund houses do not charge a penalty for missing SIP installments.

While AMCs do not levy extra charges, you may still have to pay some extra money because:

• Your bank may charge you for having an insufficient balance in your account and for the failure of an auto-debit payment through ECS. 

• These charges can vary from bank to bank and may even increase with repeat bounces. 

To know the exact penalty amount, you should check your bank’s website carefully. 
 

Myth 2: SIPs stop permanently if you miss an installment

Fact: Missing one SIP installment does not usually lead to immediate cancellation of your SIP.

A missed SIP due to insufficient balance or a temporary cash-flow issue is generally treated as a failed transaction. However, you should remember that:

• The AMC may terminate your SIP mandate if you miss three consecutive installments.

• The bank will charge a fee for failed auto-debits. 

So, if you anticipate a cash crunch in the future, it’s always prudent to pause or stop SIPs with a request letter generally 30 days in advance. Once ready, you can restart your paused SIP online. If you had stopped the SIP, you would need to submit a fresh SIP mandate to get started again. 
 

Myth 3: You cannot pause SIPs once you start investing

Fact: You can pause and restart your SIPs anytime, if needed. 

If you are facing job losses, pay cuts, or have higher expenses coming up, you can pause your SIP installments. But remember to check:

• How early you need to notify the fund house (typically, 30 days is needed)

• For how long can you pause SIP installments (most offer pauses for 1 to 6 months)

• How many times can you pause your SIP installments 

Pausing your online SIP investments is often a better alternative to stopping them completely. 
 

Myth 4: You cannot change the SIP amount, tenure, etc., once started

Fact: You can change your SIP amount, date, and other parameters flexibly whenever needed. 

In case you cannot sustain the current SIP amount due to a cash crunch or pay cut, you can change it to better suit your budget. Depending on the fund house and platform you’re using, you can easily change the following things for online SIP investments:

• Investment amount

• Tenure 

• Date of SIP debits

If your income rises or falls or if you simply wish to invest more, you can use an SIP calculator online to see how this change will impact your estimated corpus and take a call.
 

Myth 5: Missing SIP installments can disrupt your investment journey

Fact: Missing one or two SIP instalments occasionally is unlikely to significantly affect your investments.

Many beginners worry that a missed SIP will derail their entire financial plan. While a single missed instalment may not have a major impact, repeatedly missing contributions can slow down progress towards your goals. This is because:

• You invest less money over time

• Miss opportunities for rupee cost averaging

• You may lower the long-term potential benefits of compounding

You can use a SIP return percentage calculator to see how even a few missed contributions impact your total corpus over time.

 

While it’s not always possible to foresee income and expenses changes, you can plan ahead better with an SIP calculator. You can use an SIP plan calculator tool to:

• Estimate a SIP amount that comfortably fits your monthly budget.

• Understand how different SIP amounts may affect your target corpus.

• Adjust contributions based on your income, expenses, and financial goals.

• Avoid overcommitting to a SIP amount.

By using a SIP calculator before starting your SIP online, you may be better positioned to choose a contribution amount that is sustainable over the long term.
 

As a beginner, you should be cautious of all the myths surrounding missed SIP installments. You should remember that:

• There are no penalties for missed SIP installments.

• Pausing and restarting SIPs is easy.

• You can modify SIP dates, amount, and tenure anytime.

• SIPs don’t stop if you miss one or two installments.

• Frequently missing SIP installments can affect your total corpus.

Knowing these facts about SIP investments can help you manage your investments better, instead of letting fear and misinformation impact your investment journey. 

 

1. What happens if I miss an SIP installment?

   Missing one SIP installment may not have a major impact on your investment. While your next SIP mandate continues as usual, you may be charged a fee for missing the auto-debit mandate by your bank. However, missing 3 back-to-back can lead to SIP termination by the AMC.
    

2. What are some other common myths associated with SIP investments?

   Some of the most common myths associated with SIP investments include:

• SIPs can only be done in equity funds

• Buying SIPs online ensures sure-shot gains and zero losses

• SIPs can only be used for smaller investments

• SIP is a type of investment product
   

3. Can I withdraw my SIP investments at any time?

   Yes, provided you haven’t invested through SIPs in MFs with lock-in periods (like ELSS funds). If you’ve invested in open-ended mutual fund schemes, you can withdraw your SIP investments at any time as per your needs. Redemption will be based on the applicable NAV. 
    

4. Is there a lock-in period for SIPs online?

   That depends on which type of fund you choose to invest in. Open-ended mutual funds do not have a lock-in period. However, if you invest in an ELSS fund via SIP installment, each installment is locked in for a period of 3 years.