What's the optimal frequency for SIP returns? What kind of returns does historic data show for different SIP frequencies?
-Jayram
SIP returns will be different when calculated for different periods of time because they're impacted by terminal value. You should look at SIP as an optimizing tool, as something which helps you manage anxiety. From that point of view, if you're going to be investing for the next 30 years, even an annual investment is an SIP because you are systematically accumulating your investments. When you're investing for shorter periods like 5 years, a monthly investment is good enough. But at the same time, too much of a good thing may not be a good idea. If you get into an SIP on a daily or weekly basis, it could turn out to be bothersome. Hence, a monthly SIP is most ideal.
This article was originally published on June 05, 2012.
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