SIP, or Systematic Investment Plan in Mutual Funds, has become quite popular among investors these days. By investing a small amount every month, a good fund can be created in the long term. The biggest feature of SIP is that you can invest regularly in both equity and debt funds. But sometimes such situations arise when people decide to stop SIP. So, if you are also thinking of stopping your SIP, then wait a bit. It is very important to understand some important aspects before stopping SIP in between. Lest a wrong decision spoils your future financial goals.
When is the right time to stop SIP
If any of your major financial goals have been achieved, such as child’s education, buying a house or retirement planning, then this may be the right time to stop SIP. But if your goals are still unfulfilled, then it would be wise to continue SIP. Remember, SIP is a long-term investment and stopping it in between may delay reaching your financial goals.
Is your fund performing well
If your fund is consistently underperforming its peers, be cautious! But do compare the fund with the overall market once. Is this just a short-term drop? Always take a decision with a long-term perspective. Sometimes the performance of the fund may fall temporarily due to market volatility, but good funds come back on track in the long term.
Match it with your needs
Sometimes the fund house changes the objective of its scheme to earn more profits. If that new objective does not match your personal goals, it would be better to exit the SIP. Your investment should always be in line with your financial goals.
Will stopping SIP increase the risk in the portfolio
Will stopping SIP increase the dominance of a single sector or asset class in your portfolio? That is, it may happen that there are more investments of the same type, which will increase the risk. It is important to always keep the portfolio diversified. Before stopping SIP, do an assessment of your entire investment portfolio.
Understand the long-term trend of the market
Sometimes geopolitical turmoil in the market (such as international tariffs, war) can cause SIP funds to fall! In such a situation, it is not wise to panic and stop investing. The fund may come back on track in a few months. Be patient and try to understand the long-term trend of the market.
Pause SIP if needed, but don’t stop it
If your problem is shortage of cash, pause SIP for a few months, instead of stopping it completely. When the situation improves, start again. SIP is a long-term commitment, leaving it due to a small problem can harm your financial future. Before taking any decision, analyze your needs, market trends and fund performance in depth.