Mutual Funds: What is the best frequency for SIPs – Monthly, Weekly or Daily?

Updated: 11 Feb 2023, 10:25 AM IST

When you are investing for several years, then the frequency of SIP, whether it is daily or weekly or monthly, doesn’t have a very big effect on the overall returns.

SIPs discontinued or whose tenure got over also rose to 1.14 million — the highest since January.

While most investors are fairly comfortable with the idea of doing monthly SIPs, there are several who are curious to know whether increasing the SIP frequency offers any extra benefits.

How frequent can your SIP installments be?

I am sure you are already familiar with monthly SIPs. But if you opt for it, then your SIPs can be done in a weekly or daily manner.

So, for example, if you plan to invest 30,000 monthly (via monthly SIP), then you can instead have 1000 daily SIP or 7500 weekly.

But is it worth it?

At a fundamental level, SIP is a very simple concept. You invest periodically, to average out your investment costs. And if you are investing in mutual funds via SIP for the long term, then SIPs really do help in averaging out your purchase costs. So when it comes to the need to increase the frequency of SIP, my view is that do we really need to complicate it any further? SIP as an idea was started to make things simpler.

When you are investing for several years, then the frequency of SIP, whether it is daily or weekly or monthly, doesn’t have a very big effect on the overall returns.

Of course, if you crunch some numbers using the historical data, you will find that in a few cases, doing monthly SIP works better and in many others, doing a daily or weekly would have done better. In another scenario, doing a weekly/daily SIP would have worked better for some funds while monthly would have given slightly better returns for other types of funds.

But there is no way of knowing, in advance, which frequency will work better for a given fund in future. So if you have to start SIP in 3 funds in 2023 (say an index fund, a flexicap fund and a midcap fund), then there is no way of knowing now which SIP frequency will give you better returns in individual funds after 10 years in 2033.

So, in my view, trying to SIP frequency anything beyond monthly SIP is an exercise not required. Doing this analysis for fun and curiosity is fine. But for serious investors, there is no need to worry about the frequency of SIP. Choose monthly and be done with it.

There are more important things to worry about when investing via SIP in mutual funds than choosing between daily / weekly / monthly SIP frequency. Like what? Like choosing the right funds for your goals, deciding between active and passive funds, and most importantly, investing the right amount in SIP.

Think about it. If you are not investing the right amount or don’t have the right funds in your portfolio, then it actually doesn’t matter whether you are doing a monthly SIP or a daily SIP in those funds.

If you really want to benefit and increase your returns from SIP investing, make sure to make lump sum investments, in addition to regular SIPs, when markets have fallen and are under correction. That will work much better for you than increasing or decreasing your SIP frequencies.

And that is not all. Daily SIPs can be quite cumbersome to keep track of and manage things. Imagine you have 5 funds where you want to set up a SIP. Doing a monthly SIP means you will have a total of 60 transactions for 5 funds.

But assuming there are 22 market days a month, doing a daily SIP in 5 funds will mean having more than 1300 buy transactions a year! You may still be okay with that when buying, but when you decide to exit some of your mutual fund investments, you will have a pretty hard time calculating and managing the details of each SIP installment's capital gains data.

Daily SIPs may be suitable for some types of investors but for most others, it’s an unnecessary complication. They should simply opt for monthly SIPs.

You will still find some smart people who will try to convince you to pick daily SIP as they have past data to prove something about the superiority of daily SIPs. But there is no sure shot way to be 100% sure if the past will repeat again. So don’t make your financial life unnecessarily complicated. Just opt for monthly SIPs.

Dev Ashish is a SEBI-Registered Investment Advisor and Founder (Stable Investor). He provides fee-only financial planning and investment advisory services to small and HNI clients across India.

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First Published: 11 Feb 2023, 10:25 AM IST