If you are depositing money through a systematic investment plan (SIP) in mutual funds, then this news is very important for you. If a single installment of SIP is missed, then it can have a bad effect on your returns. After all, why is the date of SIP so important? If your SIP cuts on 5, 10 or 15th of every month, how long should the money be kept in the account? And if the installment is missed, how much damage can be caused? Come, let us explain all these things to you in an easy way.
What is the meaning of SIP date?
In SIP, you invest a fixed amount in mutual funds every month. This amount is auto-debit from your bank account and transferred directly to the fund. But for this it is important that sufficient balance is present in your account on the due date.
Suppose your SIP date is 5th, so by the night of 4th, there should be full money in your account. Most fund houses do auto-debit in the morning or afternoon. If there is no money in your account at that time, then your SIP can be missed, that is, there will be no investment for that month.
How much loss when a installment is missed?
Now let’s talk about the real issue. What will happen if a installment of your SIP is missed? This small omission can have a big impact on your long returns. Let us understand it with an example.
Suppose, you do SIP of Rs 10,000 every month and you hope that after 10 years your average return will be 12%. If you miss a month’s installment, there will be no loss of only Rs 10,000. You will lose 10,000 rupees, which could increase to about Rs 31,000 with compound interest after 10 years. That is, the disadvantage of missing a installment can be up to Rs 31,000.
Now if the amount of your SIP is more, such as 50,000 rupees every month, then the loss will be even bigger. After 10 years, the price of a installment of Rs 50,000 according to 12% return can be around Rs 1.55 lakh. This means that one -time lapse can harm you more than one and a half lakh rupees.
If you miss three consecutive months installment, then the total loss of SIP of Rs 10,000 can reach around Rs 93,000.
Why is it necessary to deposit money on time?
The biggest advantage of SIP is compounding interest (compounding). Every month your investment increases and interest is also added to it. But if a single installment is missed, then this cycle breaks. In such a situation, your money does not grow as fast as it could.
Most mutual fund companies provide 3 to 7 days after the fixed date of SIP. But if the money is not deposited during this time, then your installment can be missed. Some fund houses can also put penalty in this situation.
What to do that SIP is not missed?
- Prepare in advance: If your SIP is on 5, 10 or 15th, then keep sufficient balance in your account 1-2 days before that.
- Change date: If you feel that the current date is not convenient for you, you can change the date of SIP by talking to your fund house.
- Check auto-debit: Make sure your bank account is set for auto-debit and there is no technical problem in it.