SIP Investment: Daily, weekly or monthly SIP? Which is better mutual fund investment option? Know what experts speak

Over the last few years, SIPs have been the preferred method of investing in mutual funds (MFs) as they give an investor the ease of investing a small amount at regular intervals. SIPs are emerging as a popular investment option as they use market volatility to average out the cost of investment. They enable the investor to spread their investments over time. SIPs allow investors to buy more mutual fund units when the stock market corrects or collapses and fewer units when the market rises.
 
Now, while investing in a SIP, the first question that comes to mind is: which option should you opt for—a daily, weekly, or monthly SIP investment? People think that if SIPs are good, why should we not opt for the daily option? Well, investing in a daily, weekly, or monthly SIP does not impact much on the returns.

Problems you may face while opting for daily or weekly SIP

Most platforms allow you to set up monthly SIPs rather than daily or weekly ones. That implies that whether you choose daily or weekly tasks, it is up to you to do them. That entails remembering to do it and then making time to do it.
 
You will also have to keep a record of all the entries. For example, if you invest monthly, there will be just 12 entries in a year; if you opt for weekly SIP, there will be 52 entries; and if you invest daily, there will be many more entries than these two options.
 
Apart from these two issues, taxes become complicated when you make daily or weekly SIPs. Each SIP is a new investment that must be accounted for individually.
 
Also, it will be a tricky thing to track if you make daily or weekly SIP, therefore, monthly SIP is better and can be easily tracked.

Benefits of monthly SIP

Most disciplined approach

Monthly SIPs are consistent with most people's monthly income cycles and offer a disciplined approach to investing. They provide simplicity and ease of monitoring, making them an excellent option for wealth growth.
 
Compounding interest

Investing in mutual funds through monthly SIPs allows you to get the benefits of compounding. The compound effect happens when the interest generated on your mutual fund units begins to generate returns. When you spend over time, the cumulative impact works like magic.
 
Rupee cost averaging

Monthly SIPs help improve buying cost averaging. It enables you to take advantage of market swings, purchasing more units when the market is low and fewer units when the market is rising. This allows you to acquire more mutual fund units, lowering your overall investment costs while increasing your earnings.
 
No market timing required

Monthly SIPs eliminate the need for investors to worry about market timing because they invest at regular intervals throughout time, which can help mitigate the impact of short-term market swings.
 
Convenience

Investing in mutual funds with a monthly SIP is the most convenient method of investing because you can contribute as little as Rs 500. It is the best solution for those who do not have enough time to do active stock market research.

Here's what experts suggest for SIP investment:

Nitin Shahi, executive director of Findoc, says, "Investors sometimes ponder if choosing a daily or monthly SIP is more favourable when investing through SIPs. Each alternative has advantages, and the decision mostly comes down to personal tastes, financial objectives, and the type of investment. Among investors, monthly SIPs are the most popular option. Given that investors just need to make one monthly commitment, they provide simplicity and ease. For most people, this fits into their normal income cycle, which facilitates budgeting and investment planning. Furthermore, because monthly SIPs need fewer transactions to conduct, they are less administratively demanding for fund houses and investors both."
 
Shahi said, "Individuals with liquid cash often opt for a daily SIP plan, while salaried individuals typically choose monthly SIPs. Monthly SIPs require less frequent cash flow planning, catering well to the salaried person's income cycle, while daily SIPs demand more meticulous management due to their daily investment nature. The risk of timing the market is reduced with monthly SIPs, albeit less frequent, while daily SIPs offer even lower risk owing to their more frequent investment intervals," Shahi added.
 
He further explained, "In conclusion, there are benefits to both daily and monthly SIPs, and the decision between them is influenced by a variety of factors, including personal preferences, financial objectives, and market circumstances. While monthly SIPs are straightforward and convenient, daily SIPs might provide chances for cost-averaging and, under certain market circumstances, even higher returns. Investors should carefully consider all of these criteria before selecting the one that best fits their investing strategy and financial goals. The choice between daily and monthly SIPs also depends on liquidity, cash flow management preferences, and risk tolerance levels of the investor."
 
Sonam Srivastava, founder and fund manager at Wright Research, PMS, states, "While daily SIPs offer frequent rupee-cost averaging and potentially dampen volatility, their management complexity and potential for volatility in volatile funds might deter some. Monthly SIPs, conversely, shine in their simplicity, cost-effectiveness, and alignment with income cycles, yet average market fluctuations less frequently. Thus, daily SIPs cater to niche investors: those with large sums seeking aggressive averaging and individuals thriving on financial discipline. For most, monthly SIPs strike a balance between convenience, affordability, and income synchronicity."
 
Sonam added, "Ultimately, the optimal frequency hinges on your investment goals, risk tolerance, and engagement preference. Consulting a financial advisor ensures a SIP strategy aligned with your unique financial trajectory."