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When to Pause Your Systematic Investment Plan?

An effective strategy for making sure that you generate wealth over a longer period of time is a systematic investment plan. It helps you build a habit of saving frequently and helps you become more disciplined with your money.

Aarushi Chadha
SIP is an effective strategy for making sure that you generate wealth over a longer period of time
SIP is an effective strategy for making sure that you generate wealth over a longer period of time

Rupee cost averaging will be used in your systematic investment plan (SIP) investments to lower the overall cost of your investment as well. But what if the market doesn't respond as you had expected? Should you pause or rebalance your SIP investments? And when is the ideal moment to carry it out? Every investor has these crucial questions, thus they are answered below.

When is the best time to put your SIP on hold?

All SIPs have the option to temporarily stop investments. This pause feature is misused by many investors who are blatantly unaware of it. Many investors routinely use the SIP investment pause function, especially during volatile and difficult market conditions. Unfortunately, this is not the best course of action.

Investors should continue with their SIPs despite the unpredictable nature of the market. Continued investment at the market's lows permits investors to accumulate more units when the market eventually swings around, which can ultimately lead to positive long-term returns.

But, a SIP's pause provision should only be employed when there is a brief cash crunch or employment loss. You can gain breathing room while you organise your finances by pausing your SIP investments for a bit. You can start your SIP investment after you have the necessary amounts in your account.

Stopping your SIP vs Pausing your SIP

There are a few drawbacks to stopping the SIP Investing entirely. The following are some disadvantages to be mindful of if you're thinking about stopping your SIP investment: You might not be able to meet the financial objective you have set for yourself if you don't start a new investment.

There is no turning back once you quit; you must restart. The impact of compounding is maximised when you continually make and maintain investments. You will forfeit the reward if you stop the process. You would forfeit the benefit of rupee cost averaging if you abruptly stopped making SIP payments. It is usually best to pause your SIP for the reasons mentioned above.

Why should you pause your SIP?

Recently, a number of online platforms and asset management companies (AMCs) have debuted a technology called the SIP stop function. This option allows you the ability to do so while still preserving your connection to the sector because if you completely stop investing in mutual funds, you run the risk of being cut off from it altogether. The AMC determines the duration of this pause option, which may be between one month and six months. You must, however, submit your request to halt the investment 10 to 15 days before to the SIP's due date in order to take use of this service.

What time of the year is best to shuffle your SIP investments?

One more of a Systematic Investment Plan's primary advantages is the degree of flexibility it offers. You have complete control over your allocation when investing via SIP. For instance, you may do this by temporarily switching to debt funds if you have money invested in equity funds but want to diversify or do so owing to market instability.

Market downturns are when rebalancing SIP holdings are most likely to happen. By staying invested in the same fund, you can weather the market downturn; otherwise, you can decide to rebalance your portfolio.

You'll be more equipped to continue accumulating wealth if you do this, regardless of what the market does. For investors, the market can be financially draining and go through challenging phases.

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