Daily SIP vs Monthly SIP: Which SIP can give you higher return on Rs 1 lakh/year investment for 12 years
Rs 274 Daily SIP vs Rs 8,333 Monthly SIP: Systematic Investment Plan (SIP) is a method of investing in mutual funds where one can invest daily, monthly, weekly, quarterly, half-yearly, or yearly. One can start an SIP according to their income flow.
Rs 274 Daily SIP vs Rs 8,334 Monthly SIP: Mutual fund investors can invest in a scheme through two methods- lump sum or systematic investment plan (SIP). Investors who don't have a large sum to invest and want to invest periodically invest through SIP, where they can invest for different durations based on their income flow. The popular SIP is monthly, but investors can also opt for daily, weekly, quarterly, half-yearly, or yearly SIPs based on their income flow. Know more about daily and monthly SIPs and which of the two—Rs 274 daily SIP or Rs 8,334 monthly SIP—can help build a larger corpus on an overall investment of Rs 1 lakh investment per year for 12 years.
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How SIP works
In an SIP, you invest a fixed amount for every investment cycle. When you invest an amount, the mutual fund house issues the net asset value (NAV) units of the same amount. The price of the NAV changes every investment cycle based on the value of the assets it has invested in.
How SIP works
So, an investor buys the NAV at a different price every investment cycle. They buy more NAVs when its price is down and purchase less when it is high. This process of purchasing NAVs at different rates is called rupee cost averaging and forms the base of compounding in SIP investment.
What's daily SIP?
The popular SIP duration is monthly since the income cycle of most retail investors is monthly, but there can be cases where they have daily income and find a daily investment more convenient compared to a monthly investment. When one invests in a daily SIP, they purchase SIPs at different rates every day.
What's daily SIP?
The minimum amount for daily SIP can vary from the investment platform to the investment platform. The SIP provides rupee cost averaging the same way as the monthly SIP provides.
What is monthly SIP?
Here, investors invest once a month on a fixed date. The SIP amount is fixed, but investors can increase it in a step up SIP. In a step up SIP, investors can raise their investment amount in 6 months or a year.
What is monthly SIP?
The rate of an NAV is determined at the end of every trading session. So, if one invests a fixed amount in a mutual fund scheme, they get the NAV price of the closing day.
Rs 99 daily SIP vs Rs 3,000 monthly SIP
Let's see how both SIPs work. A and B decide to invest Rs 4,32,000 through SIP in 12 years. A selects daily SIP investment, while B selects monthly SIP investment. In such a case, the estimated daily SIP amount will be Rs 98.63, while the monthly SIP amount will be Rs 3,000. Let's see how much they accumulate in 12 years.
Rs 99 daily SIP vs Rs 3,000 monthly SIP
At Rs 100 a day, A invests Rs 4,32,000 in 12 years, and their estimated corpus will be Rs 9,66,225.34 in 12 years.
B will also invest the same amount through a monthly SIP, and their estimated amount will be Rs 9,66,756.52.
Calculation for the story
We will take the example of a Rs 1 lakh investment per year for 12 years through daily SIP and monthly SIP.
Calculation for the story
In terms of daily investment, the estimated daily SIP amount will be Rs 274.
As far as the monthly SIP amount is concerned, the monthly investment amount will be Rs 3,000.
What will be corpus amounts?
At a Rs 274 daily SIP investment, the total investment in 12 years will be Rs 12,00,120, while the estimated corpus generated will be Rs 26,84,231.39.
What will be corpus amounts?
At Rs 8,334 monthly SIP investment, the total investment in 12 years will be Rs 12,00,096, and the estimated corpus generated will be Rs 26,85,649.63.