SIPs help investors to average their purchase cost and maximize returns. When one invests regularly over a period of time, one would get more units when the market is low and lesser units when the market is high. This averages out the purchase cost of mutual fund units.
SIPs are becoming increasingly popular as compared to lump-sum investments as it makes use of market volatility to average out the cost of investment. SIPs can help you stagger your investments over intervals which make them safer than lump-sum investments. Also, by consistently investing in SIPs, one gets the power of compounding benefit, which produces return on returns.
With the rising popularity of mutual funds, one can be overwhelmed with all the material available on the best SIP plans in India, daily and monthly SIP investment plans, and best-performing SIPs. Through this blog, we wish to make your investment journey easy and help you decide which investment plan is better for you.
Mutual funds offer SIPs of various durations and SIPs can be classified based on their tenure; generally monthly and weekly SIPs are popular modes of investment in India. On the basis of tenure, SIPs can be classified as following-
- Monthly SIP- In monthly SIPs, a fixed sum is invested monthly in the mutual fund. These is the most commonly used SIPs by investors.
- Weekly SIP- In weekly SIPs, a fixed sum is deducted every week and transferred to a mutual fund scheme.
- Daily SIP- In daily SIPs, a fixed sum is invested daily in the mutual fund.
Which type of SIP is better?
Though the most popular SIP is investing a fixed sum of money every month, investors are free to customize the manner in which they invest money via SIPs. Various fund houses allow investors to invest monthly, bi-monthly, fortnightly or daily, according to their preference.
The growth prospects of daily SIPs are usually dependent on the efficiency of fund management. Thus, before investing in daily SIPs, an investor must thoroughly check the mutual fund’s credibility and strategy.
There are some people who would like to invest a small sum of money on daily basis instead of investing on a monthly basis. Thus, one must ensure to choose a medium that works well for them.
Daily SIPs can get impacted for the funds that have invested in small-cap and mid-cap stocks. Generally, small-cap stocks are considered volatile and day-to-day investing through SIPs in small-cap funds can lead to more volatility than monthly SIPs. Accordingly, if your SIPs are getting invested when the market is going up, you may notice higher returns and if the market is going down, daily SIPs would give you lower returns compared to monthly SIPs.
However, one must keep in mind that the difference in return between daily or monthly SIPs is negligible over time and you may struggle to monitor your investment if you opt for the daily SIP over the monthly SIP. It is a wise choice to select monthly SIPs over daily SIPs, if you get a fixed salary each month. You can also select the SIP dates that are close to your salary date, according to your convenience.
While both monthly and daily SIPs have various characteristics, it is pertinent to note that daily SIPs will diversify the investment and the returns will be average if the purchase price is averaged. However, if the fund is not volatile, the returns of monthly SIPs will be as high as compared to daily SIPs.
On the other hand, daily SIPs can limit the losses as the investment is made in portions; however, as the risk is minimized, the returns are lower than the return offered by monthly SIPs.
Daily SIPs are an optimum choice for individuals who are into business or profession that earns daily wages whereas for people earning a monthly salary, monthly SIP is a better option. It must be remembered that daily SIPs make it very tedious to track investments and returns as you will have multiple entries of purchase of SIPs in your account, making it very tough to track all assets together.
Closing Note
Apart from planning about the frequency of SIP, investors must also pay attention to selecting the right mutual fund to achieve their investment objective after carefully considering their risk tolerance. More importantly, investors must also consider the time horizon.
Lastly, it can be said that choosing between daily or monthly SIP will not have a significant impact on your returns, especially if you are investing for the long term. The onus is on you to plan your SIP investment depending on the factors and characteristics stated above.
Connect with the experts at mastertrust who can guide you with best SIP plans in India, daily and monthly SIP investment plans and best performing SIPs so that you can invest in mutual funds with ease and convenience. Plan your SIP investment in a righteous manner with mastertrust. We make mutual funds investment simple and transparent for you. Say goodbye to paper work and plan your SIP investment in the most convenient fashion with us.
