You may have heard of investing in mutual funds via two methods lump-sum payment and SIP (Systematic Investment Plan) payments. SIPs have become one of the most popular ways for Indians to invest in mutual funds.With SIP investment, you invest a fixed amount regularly - usually monthly; into a mutual fund of your choice.
They help investors build wealth gradually, brings discipline to investing, and reduce the stress of timing the market. So,in this blog, let’s understand what happens if you miss your SIP payment-
Understanding How SIPs Work?
Before discussing about missed SIP payments, it’s important to understand how SIPs function.
SIP is an investment instruction and not a contractual obligation. Here, you authorize your bank to auto-debit a fixed amount on a specified date to invest it in a mutual fund scheme and each SIP payment buys mutual fund units at the prevailing Net Asset Value (NAV).
Common Reasons of Missing SIP Payments:
Understanding the cause can help prevent future misses. Some common reasons might include-
- Insufficient bank balance
- Unexpected major expense
- Technical bank issue
- Delayed salary
- Low returns in current scheme
- Other attractive investments
This may often raise concerns like - Will I be penalized?Will my SIP stop?Will my returns be affected? - so let’s address to these questions.
Is There Any Penalty for Missing a SIP?
- No Penalty from Mutual Fund Companies-
Mutual fund houses do not charge any penalty or fine for missing a SIP instalment. There is no late fee or additional charge levied by the AMC. - Possible bank charges-
Your bank may charge you for having insufficient balance in that account and failure of the auto debit payment through ECS. These charges can differ across banks. For example, SBI and Punjab national bank charges Rs250, Federal bank charges starts with Rs250 and increases to Rs500 for repeat bounces for savings account etc. Also, GST might be levied in these charges. Thus, you need to refer respective bank websites for their charges.
Impact on Your Investments for Missing a SIP Instalment:
If your SIP instalment fails or is missed, here’s what typically happens:
- No Units Are Allotted for That Month-
When your SIP instalment is not credited, the mutual fund simply does not allot any units for that specific period. However, your existing investments remain untouched and continue to stay invested. - SIP Usually Continues Automatically-
Most Asset Management Companies (AMCs) do not cancel your SIP after one missed payment. The SIP generally resumes automatically the next month, provided sufficient balance is available in your bank account. - Loss of benefits-
SIP returns depend heavily on the power of compounding. Even a small missed instalment can affect your final corpus over long periods.Sometimes missing an instalment during a market dip means missing a chance to accumulate more units cheaply which can reduce the benefit of rupee-cost averaging. - Disturb your goal-based planning-
If your SIP is linked to a specific financial goal such as children’s education, home purchase, or retirement - missing instalments can create a shortfall in the expected corpus, requiring higher investments later and creating a delay in achieving that goal. - Cancellation after repeated missed payments-
SIPs are cancelled only after multiple consecutive failures of payments, depending on the AMC’s policy. Usually in many AMCs, for daily, weekly, fortnightly and monthly SIPs - they are auto cancelled after 3 consecutive missed instalments.For more information regarding SIP cancellation, you can visit-https://www.camsonline.com/Investors/Support/FAQ/FAQ_SIP_cancellation
What to Do If You Miss a SIP Payment?
- Ensure Adequate Bank Balance-
The first step is to verify if there were any issues with your bank account regarding the balance in the account. Try to maintain at least minimum amount to stay invested by paying SIPs on time.
- Contact Your Mutual Fund Provider-
Reach out to your mutual fund distributor for the issue and further process guide. - Revalidate Your Bank Details-
If the missed payment was due to the incorrect or outdated details, ensure that your bank details are updated at the AMC or with the broker to avoid similar issues in the future. - Make lump sum investment-
Some AMCs allows to make a lump sum investment to compensate for a missed SIP instalment to maintain your investment momentum.
Things to Remember:
- Missing a SIP instalment is not a serious offence
- SIPs work best when continued consistently in market ups and downs
- You can pause or modify the SIPs instead of letting them fail
- Frequent misses can impact long-term returns
Conclusion:
SIPs are designed to make investing simple, flexible, and stress-free. Missing one instalment won’t derail your financial future, but can create a break in your long-term wealth creation.
The goal is not perfection, but discipline over time. By keeping a disciplined approach, you can continue your investment journey and stay on track with your financial goals. Hence, stay invested, stay consistent, and let compounding do the heavy lifting.
Disclaimer: This report is prepared in his personal capacity and neither the Author nor Money Honey Financial Services Pvt Ltd assumes any responsibility or liability for any error or omission in the content of the article. Investments in mutual funds and other risky assets are subject to market risks. Please seek advice from an investment professional before investing.