What happens when an SIP ends?

Systematic Investment Plans (SIPs) offer an opportunity to take a disciplined approach towards investing in mutual funds. With an SIP, you can start with small regular investments and gradually increase them as your financial standing improves – without having to invest a large lump sum at once.

When you invest in SIP plans, you can choose from different categories of SIPs, such as fixed-tenure SIP and perpetual SIP. A fixed tenure SIP is when you agree to invest into the fund for a predetermined period, such as 5 years or 7 years. But what happens after the investment period is over? Will you have to start again with a new plan? Or do you have the option to renew the current SIP? Read on to find out.

So, what happens when your SIP plan ends? 

Once your SIP stops, no auto debit will happen from your bank account since future purchases in the scheme will be stopped. The amount invested stays in the fund and keeps growing. Now you will have three main options available to you:

• Reinvesting your funds into mutual fund investment schemes or other plans
• Renew your SIP investment
• Withdrawing your funds

1. Reinvesting your funds

Reinvestment involves reinvesting your funds into another scheme or within the same fund house.

The decision to reinvest funds should depend on factors such as age, risk appetite, current economic conditions and personal financial objectives. If you are still young and have many years until retirement, it may be wise to reinvest to take advantage of compounding returns over time.

On the other hand, if you are nearing retirement age, then it may be sensible to cash out the funds and invest them in more conservative investments such as bonds or annuities instead so that there is less risk involved in preserving your savings.

2. Renew your SIP investment

When your SIP investment comes to an end, there is the option to renew the SIP so as to maintain the continuity of your investment. Your asset management company may also send a reminder for renewal, allowing you to evaluate and decide based on the returns you experienced during the term of your SIP.

You can download the renewal forms from the AMC’s website, where details such as instalment amount, date or frequency of investing can be changed. Once you fill in the required information, submit it either at the nearest branch office of your asset management company or that of its registrar and transfer agents.

3. Withdrawing your funds

If desired, you can withdraw all or part of your accumulated funds from your mutual fund investment account upon maturity. Keep in mind that any gains received up until withdrawal may be subject to taxes according to applicable laws and regulations in India.

Additionally, keep in mind that certain mutual fund withdrawals may incur additional charges depending on the AMC’s terms and conditions, so it is important to check these before withdrawing.

To sum up

The end of an SIP does not necessarily mean the end of your investments. With careful financial planning, you can make wise decisions on how to continue your investment journey. Whether it’s reinvesting in another scheme or extending an existing SIP, you can decide your investment strategy as per your goals, risk tolerance and future capital needs.