Why You Should Not Cancel Your SIP Within a Short-Term?

Systematic Investment Plans (SIPs) have become a popular investment choice due to their ease, affordability, and potential for long-term wealth creation. However, investors might be tempted to cancel their SIPs during market downturns or due to immediate financial needs. Here are a few reasons why you should not cancel your SIP within a short period of time.

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SIP Insurance Plan Benefits
Start SIP with as low as ₹1000
Start SIP with as low as ₹1000
No hidden charges
No hidden charges
Save upto ₹46,800 in Tax
Save upto ₹46,800 in Taxunder section 80C^
Zero LTCG Tax
Zero LTCG Tax
Disciplined & worry-free investing
Disciplined & worry-free investing

  • Insurance Companies
  • Mutual Funds
Returns
Fund Name 3 Years 5 Years 10 Years
Virtue II PNB Metlife 17.59% 26.28%
17.97%
View Plan
Pure Equity Birla Sun Life 16.46% 22.3%
16.37%
View Plan
Large Cap Equity Fund Tata AIA 15.6% 22.37%
16.08%
View Plan
Pure Stock Fund Bajaj Allianz 16.09% 21.14%
15.63%
View Plan
Grow Money Plus Fund Bharti AXA 12.28% 19.29%
15.52%
View Plan
Diversified Equity Fund HDFC Standard 12.23% 18.23%
14.75%
View Plan
Growth Super Fund Max Life 11.9% 17.66%
13.67%
View Plan
Equity Fund SBI 12.46% 17.13%
13.21%
View Plan
Bluechip Fund ICICI Prudential 10.9% 16.61%
12.33%
View Plan
Growth Plus Fund Canara HSBC Oriental Bank 10.71% 14.33%
11.37%
View Plan

Updated as of Oct 2024

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  Returns
Fund Name 3 Years 5 Years 10 Years
Active Fund QUANT 24.92% 31.48%
21.87%
Flexi Cap Fund PARAG PARIKH 20.69% 26.41%
19.28%
Large and Mid-Cap Fund EDELWEISS 22.34% 24.29%
17.94%
Equity Opportunities Fund KOTAK 24.64% 25.01%
19.45%
Large and Midcap Fund MIRAE ASSET 19.74% 24.32%
22.50%
Flexi Cap Fund PGIM INDIA 14.75% 23.39%
-
Flexi Cap Fund DSP 18.41% 22.33%
16.91%
Emerging Equities Fund CANARA ROBECO 20.05% 21.80%
15.92%
Focused fund SUNDARAM 18.27% 18.22%
16.55%

Updated as of Oct 2024

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Reasons Why You Shouldn't Cancel

  1. Missing Out on Rupee-Cost Averaging

    SIPs leverage the power of rupee-cost averaging, which involves buying more units when the market is low and fewer units when the market is high. This helps you acquire units at an average cost over time, mitigating the impact of market volatility. Cancelling your SIP during a downturn means you miss out on the opportunity to buy more units at a lower cost, potentially hindering your long-term returns. To calculate your returns on SIP investments, use an SIP Calculator. An SIP calculator is a tool used to estimate the potential returns on investments made through SIPs in mutual funds or other fund schemes. It helps investors plan their investments by calculating the future value of their SIP contributions based on factors like investment amount, duration, expected rate of return, and frequency of investment.

  2. Disrupting Compounding Power

    Compounding is often referred to as the "eighth wonder of the world" by Albert Einstein, and for good reason. It allows your returns to generate additional returns, exponentially increasing your investment value over the long term. Cancelling your SIP disrupts this compounding process, potentially impacting your ability to achieve your financial goals.

  3. Market Timing is Difficult

    Predicting the exact market bottom is nearly impossible. By continuing your SIP, you avoid the risk of missing out on potential rebounds.

  4. Financial Discipline

    SIPs promote a habit of regular saving and investment, which is crucial for long-term financial well-being. Canceling disrupts this discipline.

  5. Flexibility with SIP Amounts

    Many platforms allow you to adjust your SIP amount. Consider reducing the contribution temporarily during financial needs instead of complete cancellation.

  6. Power of Habit

    Regular SIP contributions become a habit over time. Cancelling can disrupt this habit and make it harder to restart later.

    Example: SIP Growth Potential

    Let's consider an example. Imagine you started a monthly SIP of Rs. 1,000 in an equity fund 5 years ago. The average annual return during this period was 12%. If you had continued your SIP, your investment value would have grown to approximately Rs. 1,01,592. However, if you had canceled your SIP after two years, your investment value would be significantly lower, at around Rs. 32,486. This demonstrates the significant difference that time and compounding can make in your investment journey.

FAQs

  • What are some alternatives to cancelling my SIP during a financial need?

    Consider exploring options like pausing your SIP for a limited period if your investment platform offers it. You can also temporarily consider adjusting the SIP amount to manage your cash flow.
  • How can I make sure I stay disciplined with my SIPs?

    Set clear financial goals and link your SIP to them. Automate your SIP contributions to avoid the temptation of skipping instalments. Regularly review your investment portfolio but avoid making impulsive decisions based on short-term market movements.

Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

Maturity value* CAGR
₹1,05,02,174 8%
₹50,45,591 4%
Invest ₹10K/Month & Get₹1 Crore# on Maturity
*under 10(10D)
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