SIP: If you’re investing monthly in a mutual fund scheme through a SIP, it’s important to keep a few things in mind. To build a large corpus over the long term, you need to maintain discipline in your investments. Missing a SIP payment impacts your long-term returns. Many investors start investing in mutual fund equity schemes through SIPs, but they stop their SIPs when the market declines significantly.
Missing SIP payments can reduce your returns
If an investor invests Rs 5,000 per month through a SIP, making just three SIP payments a year could result in a missed opportunity for returns of over Rs 1.5 lakh over 15 years. For this calculation, an average annual return of 12% is assumed. In fact, the longer the investment period, the greater the impact of missing a SIP on overall returns.
A major reason for missing SIP payments is choosing the wrong date for the SIP. The SIP payment date should be one that allows for sufficient funds in your savings account. Many investors, for this reason, set the SIP payment date immediately after their salary. This can be illustrated with an example. If your salary is received on the last day of every month, you can set the SIP payment date between the 1st and 5th of each month.
You can use a separate bank account for SIP payments
To avoid missing SIP payments, you can use a second bank account for your SIP. Then, as soon as your salary is credited to your bank account, you can transfer the SIP amount to the second bank account. This eliminates the risk of missing a SIP payment. Many investors use a second bank account for SIP payments. This helps maintain discipline in SIP payments.
Make sure to use the bank’s ECS facility
SIP funds are automatically deducted from your bank account each month using your bank’s ECS facility. Banks also send SIP payment reminders to investors, informing them of the scheduled date for the SIP payment. Investors are advised to maintain a sufficient balance in their account on that date. This lets investors know how much money is required for the SIP payment.
