Can you sell units during an ongoing SIP?

By Morningstar |  08-06-18 | 
 

At the time of opening my SIP account, I had entered the time period as 60 months, or 5 years. Now I want to withdraw some money. If I do so, what is the penalty levied?

- Karan B

In case you have conflated the two mandates, let us clear a probable misconception.

The Systematic Investment Plan, or SIP, is an investment process that will go on unaffected by the withdrawals you seek. Investment and Redemption are two separate mandates.

Withdrawal from a plan does not automatically stop the SIP. Your SIP instalments into the fund will continue and fresh units will continue to be purchased as per the stated mandate, even as you withdraw from the fund. If you do not want to continue with the SIP, then you would need to separately request for its cancellation.

Now to directly answer your query, there is NO penalty for withdrawing from a fund in which one is investing through the SIP mode.

Having said that, an exit load may be charged for redeeming before a stipulated period. In case of investment through SIP, every instalment is treated as a fresh purchase. Thus, the exit load charged will depend on the holding period of each instalment.

Let’s assume you are investing Rs 1,000 every month in a particular fund via a SIP. And the fund charges an exit load of 1% if you hold the units for less than a year. Two years down the road from the commencement of your SIP, the investments made in the first 12 months will not attract any exit load. But those made after 12 months will attract the 1% exit load.

Withdrawal from a plan does not automatically stop the SIP. Your SIP instalments into the fund will continue and fresh units will continue to be purchased as per the stated mandate, even as you withdraw from the fund. If you do not want to continue with the SIP, then you would need to separately request for its cancellation.

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