You are confident your SIP is a great long-term investment to support your goals, but bear in mind that flexibility is key. It can be wise to exit your SIP for genuine reasons – such as an exit strategy or due to the fact that there is an exit load if you close it before the stipulated time frame. Let’s examine some of the potential arguments for discontinuing your SIP.

When you began your equity SIP, you had hope that it would lead to your long-term objectives. Although SIPs tend to produce successful returns over 8-10 years, there is a way to detect poor performance. Monitor the 3-year rolling returns on a quarterly basis for two years; if the SIP continuously falls short compared to indices and peers, it is likely time to exit and seek alternative investments. While fluctuations in results are expected, any underachievement should be taken seriously.

Generally, fluctuations in certain economic indicators can cause long-term changes in investment results. For instance, if inflation is high, equity funds are likely to be unsuccessful. Similarly, in the case of a sustained rise in interest rates, continuing with a SIP on traditionally long-dated debt funds might be ill-advised. If you anticipate a drop in the value of the Rupee or an economic slowing down, these factors should inspire you to end your SIP agreement.

You may have started a SIP 3 years ago to pay for your home loan margin, or you may have started one ten years ago to pay for your son’s college education. There is no link between negative performance or negative macros. A SIP should always be terminated when it is tagged to a specific goal milestone and the purpose of the SIP has been fulfilled. Afterward, you can decide whether to replenish the SIP on your own.

The SIP does not match your ultimate goal. For instance, your goal may still be far off, but your annual review shows you are falling short. Alternatively, your goals may have become more expensive due to inflation or external factors, which might be due to either underperformance of equities as an asset class or underperformance of the SIP. Either way, this is a legitimate reason to reconsider your SIP and make alternate arrangements.

This is quite a common problem. For example, the fund manager who has been doing a wonderful job for the last 10 years may have moved on. There are times when an AMC is sold to a new fund manager, and you may not agree with the fund’s strategies. You can also terminate your SIP if the fund’s objectives have changed or its asset mix has changed in a way that is incongruent with your objectives.

One must not blindly accept everything posted on media or social media. We recommend taking these reports with a grain of salt. However, if SEBI Investigations, customer displeasure, services issues, accusations of circular trading are consistently popping up in the press and online platforms, then we suggest exercising caution. It is likely that these warnings are based on some truth. Hence, if there is an accumulation of negative feedback concerning your fund, it may be wise to divest.