NAV of a fund changes only when there is a change in the value of the underlying assets..
14-Jun-2013 •Research Desk
I have SIPs in five funds. My bank relationship manager has advised me to spread my SIPs throughout the month instead of on a single day. On further questioning, he justified this saying that SIPs are purchased mostly by salaried individuals and get cleared by ECS on first or within first week of every month thereby resulting in highest NAV of a given AMC. This results in decreased allotment of units for individual holders. If we spread our SIPs and they get cleared on, for example, 15th, 18th, 25th ,28th and 30th of every month, we can get more units with the same amount as compared to a person purchased in early days of a month. How far is this logic reasonable?
Your bank's relationship manager is not right. The amount of money being invested in equity fund through SIP is not of a scale that can push up the market on a specific day. Besides, the net asset value (NAV) of a mutual fund is in no way affected by the number of people investing into the fund at any point of time. NAV of a fund is calculated by dividing total assets of the fund by the number of units. If more investors join the fund, not only will the assets increase, but so will the underlying units. Hence there won't be any impact of the same on NAV. NAV of a fund changes only when there is a change in the value of the underlying assets like if you have invested in an equity fund, the NAV will increase only if equity market performs well or vice versa.
More than anything else, your SIP should be determined by your convenience. There is nothing to prove that distributing SIPs across a month is better than paying on a single date. You should first ascertain how frequently you can set aside funds for investment without straining your finances. While there is no doubt that an SIP is the best way to invest in equity funds, there is no sound basis to determine the date of investment.
If you can invest comfortably every month, go for the monthly option. The date of investment will not affect the performance of your portfolio as much as your discipline over the long term. Irregular sums of investments, invested regularly still manages to average out the investment over the long-term and over a 5- or 10-year investment cycle will not have a marked difference in returns.