Systematic Investment Plans, or SIPs as they are popularly called, involve you investing an affordable amount periodically into a chosen mutual fund scheme. You link your bank account to your SIP and the SIP amount is debited every month on the SIP due date. What if your bank account balance becomes low and insufficient to cover the next SIP? Would your investments be discontinued?

Missing a SIP payment is quite common. Many investors miss SIP either because they forget or due to unavoidable financial expenses their bank accounts balance become insufficient to pay the instalment. However, missing SIP payments is not a cause of worry. Your investments do not discontinue in such cases nor does the fund house charge a penalty for missing the payment. A SIP is an investment which you do and the only drawback that you face is that your corpus suffers a missed instalment. "Later, you can deposit money into your bank account and as the next SIP date arrives, the payment would be done, and your investment would continue without any hiccup.

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Things to look out for

Though missing one or two SIP payments has no adverse outcome, here are two things which you should remember about missing your SIP payments –

• If you miss three consecutive SIP payments, your SIP investment would be terminated by the mutual fund house

• Your bank may charge you a penalty when your account balance is low and you miss your SIP payment. This is called dishonouring the payment and a charge is involved in these cases.

How to avoid missing SIP payments

You can be a smart investor and avoid missing your SIP payments in the following ways –

• Keep an eye on your bank account balance. If the balance becomes low and insufficient for meeting your SIP payment, try and increase the balance before the SIP due date by making deposits into the account

• If you know that due to unavoidable financial obligations you would face heavy expenses and would not be able to pay the SIP payments, you can stop your SIP. Simply log into your SIP portfolio and choose to stop the SIP payments. Later on, when the cash crunch is over, you can restart the payments and in the meanwhile the earlier SIPs would continue to grow if you don’t redeem them.

• There is also an option to pause your SIP investment if you foresee heavy expenses and liquidity problems. Many mutual fund houses allow you to pause your SIP instalments for up to a specified number of instalments or for up to a specified period after which they start automatically. Check if the AMC offers this option and pause your SIPs for some months when you would face a financial crunch.
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So, if you have missed a couple of your SIP instalment dues to unavoidable circumstances then you don’t have to be stressed. However, do remember that missing out too many SIP instalments would mean that you may not achieve your target corpus amount as the required contribution is affected. Plus, you may also not reap the benefit of rupee cost averaging fully. "Hence, it is best to avoid missing your SIPs instalments or if it is unavoidable then you can cover up for the loss by making additional purchases in the same scheme in the same folio when you have enough funds.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.