If you are worried about your income if another wave of Covid strikes, then use flexible systematic investment plans (SIPs) to increase or decrease the amount you invest. Here’s how
During the pandemic in 2020 and 2021, many people saw salary cuts or lost their jobs. And if the situation was made worse by medical expenses, allocating money to investments would have been extremely difficult. Many would have chosen to stop or pause their systematic investment plans (SIPs).
If you are now more comfortable in terms of finances, you can consider restoring your SIPs to the earlier levels, while keeping open the option of reducing it as needed.
Let’s take an example. Say, you reduced your SIP investments to Rs1,000 each from Rs10,000 and Rs5,000, respectively, earlier. Now you want to restore to the earlier levels but with some flexibility to increase or decrease.
The flexibility that you are looking for with respect to increasing and decreasing SIP investments is indeed available but depends on the fund house, broker or distributor. One needs to check if they provide these facilities or not.
Some fund houses give the facility of pausing and restarting SIPs for and within six months. Systematic top-up SIP facilities are also available. Some even offer weekly SIPs.
As you wish to invest the same amounts as you used to in SIPs, one way to do that is to start an additional SIP in the same fund/folio. You can do this online or offline by filling up a transaction form. In future, if you want to add to or reduce the SIP amount, you can cancel the old SIPs and start new ones with a different amount 15-20 days prior to the SIP dates.
Here are some options:
For example, if you want to resume an SIP that was originally of Rs10,000, and is now of Rs9,000. You can start a new SIP of Rs1,000 by selecting the same fund / same option / same folio number and it will get added to your original SIP. Registration of SIP takes 10-15 working days, so select a date for the new SIP to match the original SIP's date. For instance, if your original date was 20th of month, and today is 2nd or 3rd of the month, you will be able to get the same date as the earlier SIP and your SIP will start in this month itself. However, if today's date is, say, 10th and you select the starting date for the new SIP as 20th, it will start from next month.
Keeping the dates similar or the same helps manage the monthly budget since the outflow is during the same period every month and you know when to ensure that a suitable amount is available in the bank account.
The author is a Certified Financial PlannerCM and Financial Coach, LUHEM.
DISCLAIMER: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.