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While many investors start SIP for creating long term wealth, at times, they need a small sum of money to fund unexpected expenses.
In these cases, a few clients prefer withdrawing money from their MF investment whereas some of them pause SIPs for two-three months to arrange for funds.
Cafemutual spoke to leading distributors and advisors to know what is the best way to deal with such a situation.
Varanasi MFD Ankush Thukral of Thukral Capital believes that the decision to stop or continue the SIP depends on the client’s situation. He said, "I would first ask the client why they want to withdraw the money. My next question to them is if they can reinvest the withdrawn money in the near future. If they are willing to reinvest, I recommend them to continue SIPs. However, if they do not reinvest, I recommend they stop SIP for a few months.”
Mumbai MFD Gajendra Kothari from Etica Wealth feels that SIPs should not be seen as a burden to investors. He said, “The beauty of SIP is that it is flexible i.e. it can be paused or stopped or amount can be increased or decreased along with the flexibility of dates. If a client needs a small sum of money, which can be fulfilled by stopping SIPs for a few months then it is the ideal way for them.”
Guwahati MFD Rajesh Sarawgi of Sarawgi Finserves is of the view that understanding the client's situation is crucial before deciding whether to continue or stop the SIP. He said, “If the client is facing financial difficulties, it will be wise to stop the SIP. However, if the client is financially stable, I tell them to continue their SIP and withdraw some money.”
However, a few experts have a different view. Mumbai RIA Suresh Sadagopan of Ladder7 Wealth Planners believes investors should not break investing discipline by pausing or stopping SIPs. He said that investors should reduce their SIP amount in needed. If things do not workout, they should consider redeeming MF investments and continue their SIPs.
Mumbai MFD Saurabh Mittal of Circle Wealth tells his clients to redeem money and continue SIPs with higher amounts to make up for the redemption. He feels that stopping SIPs should be a last resort.
