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2 mins Read | 3 Months Ago

Which one is better? Daily SIP or Monthly SIP?

High dividend-paying stocks & Mutual Fund schemes

If you are a Mutual Fund investor, you would already know about SIPs (Systematic Investment Plans). Over the last few years, SIPs have become the go-to option for investing in Mutual Funds, especially equity funds. The benefits are clear. With SIPs, you can build a large corpus with small investments. You also get to average your investment cost (an aspect called rupee cost averaging) and become disciplined in terms of investing. You can make use of certain tools like an SIP Return Calculators to calculate your estimated returns on investments.

A common question that arises is if SIPs are so good, why not invest in more of them? What if you opted for weekly or even daily SIPs? Will you get better returns due to better averaging?

Investing in daily or weekly SIPs has its own complications. Most platforms allow you to do monthly SIPs, not daily or weekly. That means if you want to opt for the daily or weekly ones, it is on you to carry them out. You have to remember and find the time to do it – every week or every day.

Secondly, your record-keeping responsibilities will go up. With monthly SIPs, you will have 12 entries per year per fund if you only buy. With weekly SIPs, you will have 52 entries per year per fund.

Further, taxation becomes tricky when you do daily or weekly SIPs. Each SIP is a fresh investment and has to be accounted for separately. So, daily/weekly SIPs can multiply your workload significantly, without compensating you appropriately. Of course, the fund house may provide you with a ready statement. But will you be happy to receive PDFs of multiple pages?

Which is better: Daily, weekly or monthly SIPs?

SIPs have become synonymous with monthly investments. There is a reason for that. As you saw, investing once a month is easier. Plus, most people have a monthly income cycle, so monthly SIPs perfectly gel with that frequency. So, by all means, you can go for monthly SIPs, as daily or weekly SIPs do not enhance your returns significantly. Further, if you want to know which date of the month is best for your SIPs, then you can check our analysis on the same too.

How can you enhance your returns if daily/weekly SIPs are not the way out? One definite way to increase the returns from your investments is to invest in a disciplined manner and avoid some of the common SIP mistakes that investors make.

Types of SIPs based on tenure

SIPs can be classified based on their tenure. Generally, monthly and weekly SIPs are popular modes of investments:

  • Monthly SIP:

    A fixed sum is invested monthly in the Mutual Fund. This is the most common SIP

  • Weekly SIP:

    A fixed sum is deducted every week and invested in the Mutual Fund scheme

  • Daily SIP:

    A fixed sum is invested daily in the Mutual Fund.

Which type of SIP will be beneficial for you?

Studies have shown that SIP frequency, be it daily, weekly or monthly, has no major impact on returns. The difference in returns between daily, weekly or monthly SIPs is negligible over time. However, you could struggle to monitor your investment if you opt for daily SIPs over monthly SIPs. Monthly SIPs are a better choice if you receive a fixed salary each month, as they align with your income cycle.

Daily SIPs might get impacted by funds that have been invested in mid-cap and small-cap stocks, which are generally considered more volatile. Daily investments in such funds can lead to higher volatility compared to monthly SIPs. On the other hand, daily SIPs can offer stable returns when investing in large-cap funds.

The growth prospects of daily SIPs depend on the efficiency of fund management. Therefore, it is essential to consider the credibility and strategy of the particular Mutual Fund before opting for daily SIPs. Daily SIPs can limit losses as investments are made in small portions, but they tend to offer lower returns compared to monthly SIPs.

For individuals earning daily wages, daily SIPs can be a suitable option. Salaried employees can opt for monthly SIPs with the SIP date chosen closer to their salary credit date for convenience.

Daily SIPs can diversify investments but monthly SIPs offer better investment planning opportunities. While daily SIPs can be tedious to track and result in multiple entries in your account, monthly SIPs provide a more manageable approach.

So, the answer to the question of whether daily SIP or monthly SIP is better depends on your income cycle, risk tolerance and monitoring capabilities. For most investors, monthly SIPs remain the preferred choice, offering simplicity and effectiveness in wealth creation.

In the daily SIP Mutual Fundvs monthly SIP debate, monthly SIPs emerge as the preferred choice for most investors. The data suggests that increasing the frequency of SIPs, such as opting for daily or weekly SIPs, does not significantly impact returns. Moreover, daily or weekly SIPs come with added complexities in terms of record keeping and taxation.

Monthly SIPs align well with the monthly income cycle of most individuals and provide a disciplined approach to investing. They offer simplicity and ease of monitoring, making them an ideal choice for wealth creation.

Ultimately, the key to enhancing returns from SIPs lies in consistent, disciplined investing and avoiding common SIP investment mistakes. Regardless of whether you choose daily or monthly SIPs, the primary goal should be to stay committed to your investment journey and reap the benefits of compounding over time.

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