The stock market has been facing a decline for the last few weeks, a similar trend is expected in the coming days. The impact of the ongoing decline in the market is affecting investors. This trend is becoming more difficult for investors investing in equity every day. Due to the ongoing decline in the market, the value of equity decreased, due to which investors suffered losses. In such a situation, investors who are regularly investing money in mutual funds through Systematic Investment Plan (SIP) may also suffer losses. However, mutual fund SIP investors can pause their investment for some time by choosing the pause option. What is ‘Pause’ option in SIP? When can it be selected? What needs to be done for this? Let us understand all these aspects.
What is ‘Pause’ option in SIP?
SIP Pause option provides a special facility to investors. Using this facility, investors can temporarily stop their investments for some time. To avoid the impact of a sudden financial crisis or the ongoing market downturn, they may choose to pause their investments in mutual fund SIPs for a few days instead of closing them. Earlier this facility was for 1 to 3 months, but now some fund houses have extended it to 6 months.
If you take the option of ‘pause’ SIP for 6 months, then after 6 months the SIP amount will automatically start getting deducted from your account. No additional interest will have to be paid on this. This means that your SIP will not stop; to achieve your goal, you extend it for another 6 months.
Also read: FD Benefits: Why invest money in FD? Invest after knowing the reasons and benefits
When can you choose SIP pause option?
Financial Crisis:SIP pause can provide you financial relief during challenging times, such as a medical emergency, job loss, or unexpected expenses. The amount that is being saved can be used for more important matters.
Career change:Many times, during a change in career, one has to change the job, or there is a plan to take a few months’ rest from the job for higher education, or there may be a plan to start a new business, due to which the expenses increase. In these conditions also you can take the option of SIP pause.
Personal Requirements:When expenses suddenly increase due to marriage, buying a house or any other family related event, SIP pause can definitely provide some financial relief for a few months.
Also read: Jio Bharat 4G phone now for Rs 699, 455 TV channels, 14GB data and unlimited calling at a monthly cost of just Rs 123.
What needs to be done to avail the facility?
If you also want to avail the facility of SIP ‘Pause’, then you can give this information to the Asset Management Company i.e. AMC through mail. You will have to submit a ‘pause’ request according to how many days your company provides pause facility. That means, if the company is providing this facility for 1 to 6 months, then you can pause SIP for at least 1 month and maximum 6 months only. You will have to provide information about your folio number in the mail. After which the company will provide you this facility. SIP will be released after the ‘pause’ period is over.
It is not wise to stop investing
If any kind of financial problem arises and you feel that things will improve in future, then you should not stop SIP. Instead, you can avail the facility of SIP pause. This does not affect your investment objective. For example, during the Covid pandemic, most people were facing financial crisis. Due to which many people had chosen the ‘Pause’ option in SIP. After some time, SIP was started again. Let us tell you that when the market recovery started after Covid 19, it lasted for a very long time.
Also read: Tax Rules on Gold: If you are buying gold during Dhanteras, Diwali, then first understand the rules related to tax.
Now due to many domestic and international factors including geo-political tension, the stock market is witnessing a decline for the last few days. In such a situation, investors are facing heavy losses every day. Investors who are investing in mutual funds regularly on monthly or quarterly basis in small amounts through SIP can use the pause facility for some time to avoid any kind of loss. SIP will start again after the stipulated time.
