SIP Payment Miss: Why Investors Should Avoid The Third Strike At All Cost

Investing in a regular manner is one of the best ways for an individual to build wealth over a period of time. This is best done through the systematic investment plan route, where a fixed sum of money is invested each month into a mutual fund scheme. This is being used by lakhs of investors for their investment purposes, but there are times when this transaction does not go through due to various reasons. It is important for the investor to check when there is a missed transaction and ensure that the fault is corrected, because ignoring this can lead to severe consequences.

The SIP process calls for a fixed sum of money to be invested regularly and this is usually done once a month on a specific date. The process calls for giving specific instructions in advance so that every month, the money goes automatically from the bank account to the mutual fund. This ensures that the investment is completed smoothly and without any problem of human intervention every time there is a transaction scheduled. There are times when the investor ends up missing an SIP and this occurs either due to some technical reason with the instructions or a lack of funds in the investor's bank account. If there is some technical reason for the rejection, then this will be rectified, and the investor can ensure that the investment process resumes. However, if there is a lack of balance in the bank account, then this could be due to the negligence of the investor and there is no one else to blame but themselves, so they need to set this right.

The first part of the entire process for the investor is to keep track of the SIPs that they have started and see that the money is going every month from the bank account. This requires paying attention to the bank account and the transactions happening therein. Due to multiple transactions taking place through the bank, it is often seen that the investor is not even aware of the fact that there is a problem with one of the transactions. Keeping an eye out for any misses is important, as this will bring the problem to light. Once this is known, steps have to be taken so that a corrective plan is put in place. This will ensure that the problem is rectified and it might require a bit of effort to do this.

A miss can sometimes occur due to several reasons and this might be tolerated if there is a temporary problem on hand. This can have some impact if the transaction does not go through and the units are not allotted for the month. If the problem persists and there are more misses, then the impact could be severe. A single miss will not invalidate the entire SIP process and if there is an adequate balance in the bank account in the next month, then the transaction will once again go through. Missing out on three consecutive SIPs will, however, lead to more serious action, as such a miss would ensure that the mutual fund cancels the SIP. This would lead to a permanent cessation of the SIP and this would no longer be valid even if there was an adequate balance in the following month. This is why one has to be careful and ensure that there are no multiple or consecutive misses on the SIP front. Sometimes, just ignoring the situation can lead to severe consequences, and the investor should ensure that this does not happen.

Arnav Pandya is founder Moneyeduschool.