scorecardresearchWhat's the best date in a month for your mutual fund SIP? This survey has the answer

What's the best date in a month for your mutual fund SIP? This survey has the answer

Updated: 21 Oct 2022, 12:48 PM IST
TL;DR.
A recently released report by WhiteOak on SIPs indicates that investing in an SIP gives similar returns to investors irrespective of the date at which SIP is made. We share more details here.
The report shows that mid cap funds gave maximum returns in the long run

The report shows that mid cap funds gave maximum returns in the long run

Rookie investors in mutual funds may believe that the returns given by a mutual fund scheme are partly determined by the day of month on which SIPs is made. A recently concluded study carried out by WhiteOak, however, shares a finding that the returns will, more or less, be the same notwithstanding the day at which SIP contribution is made.

The ‘SIP Analysis Report’ shows that the returns on SIP (% XIRR) remain more or less the same regardless of the date that has been chosen for the systematic investment plan (SIP) contribution. The return on SIP ranges between 15.71 to 15.8 percent on 28 different days of the month.

As shown in the table below, the extended internal rate of return (XIRR) will be 15.8 percent when SIP is made on the first date of every month, it marginally wavers to 15.77 percent when the SIP is made on the 15th of every month, and it becomes 15.78 percent and 15.79 percent when SIP contributions are made on the 20th or 25th of every month.

Day of month         Return (XIRR %)
1                                 15.8
5                                15.75
10                              15.71
15                            15.77
20                               15.78
25                             15.79

Likewise, there is a perception —albeit wrongly — among investors that the frequency at which SIP is made also determines the return given by a mutual fund scheme. This belief is also turned on its head by the report that shows that it does not matter whether SIP is made daily, weekly or monthly; the rate of return will more or less be the same.

After analysing the data between September 1996 and September 2022, the report shows that the rate of return will be 14.3 percent in case of daily, weekly and monthly SIPs when the total amount invested is same i.e., 64.72 lakh during this period.

The message that is conveyed is this: starting an SIP early and continuing for a long term is more important that what frequency one selects.

Market capitalisation

When it comes to choosing between large cap, mid cap and small cap funds, mid cap segment was a good investment option for investors to invest via the long-term SIP route, reveals the study.

The median SIP return for Nifty midcap 150 TRI was highest at 16.5 percent, whereas for large cap (Nifty 100 TRI), the corresponding figure was 12.5 percent, and for small cap (Nifty small cap 250 TRI), it was 14.2 percent.

Market Cap   Return (%)
Midcap            16.5%
Large cap        12.5%
Small cap   14.2%

(Source: WhiteOak MF's SIP Analysis Report)

Finally, the report concludes that a successful SIP is more about starting early, maintaining the discipline of investing regularly, investing for long term to achieve our financial goals and less about which date and which frequency has been opted for.

 

First Published: 21 Oct 2022, 12:48 PM IST