BSE See NSE See 49,099.99
-1,939.32 (-3.8%)

When to stop your SIP?

Prakash Patil
/ Categories: Mindshare, Markets
Rate this article:

If you are thinking of stopping your SIP instalments because you are not satisfied with the performance of the scheme and feel that the fund manager is not delivering returns matching that of comparable schemes, think again. The underperformance of the scheme may be due to the market downturn rather than incompetence of the fund manager, and this could be a temporary phase. In which case, your decision to pull out of the scheme may not be a prudent one.

But there may be some situations when your decision to stop paying the SIP instalments can be justified. Mutual fund houses are nowadays in the process of recategorisation of their existing schemes or merging their schemes to conform to the Securities and Exchange Board of India’s (SEBI’s) directive aimed at rationalisation and categorisation of mutual fund schemes in India. If the merger or recategorisation of a scheme results in a change in the objective of the scheme, then you should consider exiting the scheme if the new objective of the scheme is at variance with the original objective and does not match with your own objective of subscribing to the scheme or is at odds with your asset allocation.

Secondly, a change in the fund manager of a scheme can lead to underperformance of a scheme and one may be justified in exiting the scheme. The performance of a scheme depends on the experience and professional competence of a fund manager, so a fund manager with vast experience and with excellent track record of performance will usually deliver higher returns. Therefore, exiting a scheme where a new fund manager with little or no experience or track record of past performance has taken over could be justified.

Lastly, if the fund has been consistently underperforming the benchmark index as well as other peer schemes for a duration of three years or more, there is no reason to continue pouring your money into the fund and you would be justified in existing it.



Previous Article RBI policy review is positive, but time for caution
Next Article Investing in bonds
Please login or register to post comments.