Introduction

The convenience of investing in a Mutual Fund scheme through a Systematic Investment Plan cannot be overstated. Simply having a dematerialised account allows you to easily begin an SIP with a minimum of Rs.100/-.

By choosing a SIP, you can make consistent, incremental investments over time instead of putting in a large sum all at once.

In this piece, we will discover the optimal interval for investing your money and where to achieve the greatest returns.

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In determining the most suitable option between daily and monthly SIPs, it’s crucial to discern which one is in line with your financial objectives and lifestyle.

For those who receive a monthly salary, opting for a monthly SIP would be the more convenient choice as it aligns investment dates with your salary deposit. On the other hand, if you earn daily wages, a daily SIP would better suit your cash flow.

Key Considerations When Choosing a SIP Frequency

Market Impact

Investing in mid-cap and small-cap funds on a daily basis may increase volatility. While a market upswing could result in better returns for daily SIPs, they may not fare as well as monthly SIPs during a market downturn. In contrast, daily SIPs in large-cap funds generally offer more consistent returns.

Fund Management

The effectiveness of daily SIPs is heavily reliant on the management of the underlying fund. Therefore, it is crucial to assess the credibility of the mutual fund and develop a sound investment strategy before committing to daily SIPs.

Risk and Returns

Utilizing daily SIPs allows for a finer distribution of investments, thereby limiting potential losses. However, it is important to note that this may result in lower potential returns compared to monthly SIPs.

Income Frequency

Daily systematic investment plans (SIPs) are recommended for individuals with daily earnings, such as business owners or freelancers. On the other hand, monthly SIPs are more suitable for those who receive a monthly salary. 

Diversification

While daily SIPs offer diversification on a day-to-day basis, it is still advisable to have a well-diversified financial portfolio. In the case of low volatility, monthly SIPs can potentially yield greater returns than daily SIPs.

Ease of Monitoring

Opting for a monthly SIP provides a simpler way to track and plan your investments. On the other hand, daily SIPs can be more complex to monitor as they involve frequent entries in your account, which can make it laborious to keep tabs on all your investments and returns.

Why Daily SIPs can be challenging

No Standing Instruction for Daily SIP

Many broking platforms only offer monthly SIPs and do not allow for the setup of standing instructions for daily or weekly ones. Therefore, if you opt for daily or weekly SIPs, you will need to manually execute them. This can be a more difficult and time-consuming process that may also result in added costs.

Difficulty in Record Keeping

Another concern arises with the growing responsibility of maintaining records. Opting for monthly SIPs would result in 12 entries per year for each fund, while choosing weekly SIPs would increase that number to 52. Daily SIPs, on the other hand, would require a much larger number of entries, making this task more intricate.

Difficulty in Tax planning

The complexity of taxation can arise when utilizing daily or weekly SIPs. Each installment is considered a distinct investment and must be managed separately for tax purposes. This may result in added responsibilities without proportional rewards.

Conclusion

Although the fund house can offer a consolidated statement, you may still need to handle various PDFs that could potentially be lengthy, leading to a daunting task. Ultimately, deciding between daily or monthly SIPs is influenced by your financial status, income schedule, and investment objectives. Monthly SIPs allow for improved organization and tracking, while daily SIPs may be more suitable for individuals who prefer a detailed approach to investing.

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