Which is the best SIP date?

SIPs are gaining popularity. Everybody has come to understand that if you do it for a period of time, it turns out to be something useful and rewarding. But how do you go about doing it?

What's the best frequency for SIPs?
SIPs can be done every day or weekly, monthly, quarterly, whatever you decide. Not only that, today, it is possible for people to be investing on days of their choice. Once you start investing, subsequently it is very easy - you just decide to invest and you invest.

If you think that on all the days the market goes down, you will invest Rs 5000, that is always a possibility, but you will have to do it every day. But that is not the point. The point is that SIP brings regularity and a method to your investing cycle. And for most people, because we earn and are in a job, we get paid every month, and if we get paid every month then why not invest every month. That's the basic rationale. It's not that daily or weekly SIP is bad or monthly is best or any such thing. There is absolutely nothing like that. It's all about becoming a regular investor.

Investing should be very much in line with your income cycle. So, if you become a mutual fund investor, and if you run a shop and you want to take Rs 200 out of your cash box into investment, that will do it and it won't hurt you. But most people who earn their salary and get it on a specific day, they should do it on a monthly basis. It's easy and not cumbersome. Today, technology makes it possible to invest at will or on any day of your choice. But all I would suggest is you become a regular investor and bring some method to it. Don't apply too much mind on this, and leave it to your discretion that on some days you will do and some days you won't do. Because on many days you won't do and the magic of compounding doesn't happen if you are not very regular. To make your money grow you have to accumulate and whatever be the periodicity, just do it.

How will the returns of daily, weekly or monthly SIPs differ?
To check if there is any big difference in SIP done on a daily basis as compared to a weekly basis or a monthly basis, we just picked the best performing flexi-cap fund over the last 10 years. We did a SIP of Rs 100 every day, an SIP of Rs 500 every week, and an SIP of Rs 2000 every month. The net result was that you end up with a somewhat similar amount, a little over Rs 7 lakh. But the most important thing is that your annualised return was just as much - it was 20.1 per cent, which is a handsome return because the money was going in the best performing fund. But the important thing is that there is absolutely no meaningful difference resulting from your daily, monthly or weekly investment.

SIP on which date would help maximise returns?
Which date you choose which will turn out to be the best date for your SIP is a very hard thing to do. I can't do it. You will have to consult an astrologer and I'll tell you the reason. Even if there is a pattern or if I do a back testing of the day that you are doing your SIP on the first or fifth or 15th, there might be a pattern but I don't think I will attach any value or weight to it. Reason being there is absolutely no basis - why it should be true or why it will repeat in future? If something is not repeatable, then it is worthless. So that doesn't matter. So just choose a day which is convenient to you or when you think that the money will be debited from your account and your account will have that money on that particular day, and you're not in anxiety when that money is going to be debited from your account. That's all.

So my suggestion to you will be instead of looking at which day, what periodicity, or which kind of fund, (of course the kind of fund is an important decision to make) you should be bothered about that you're putting your long-term money in an SIP, you are choosing an equity fund or a dominantly equity fund, and you are increasing your investment amount with your rising income. If you start with Rs 1000, don't think in terms of a constant amount. Next year or five years when your income rises, you increase your SIP amount. Make sure that your SIP is very much in line with your income cycle. If you get your monthly salary, then it should be a monthly one. If you are in a business or in a profession wherever your income is erratic, there you should work towards making an investment which is a percentage of your income in a completely non-SIP manner. That means whenever you get income, you make your investment and you spend the rest of the money.

So this is the key - increase your SIP amount and don't bother about the periodicity and the income. Do it at your convenience and do it for five years and more. And after that, I don't think I need to really persuade you. The facts will be a bigger persuasion. Your ability to convert a small cash flow into a sizable capital, and that too in equity, it gets magnified. So, let this magic happen. Do it for five years, and it will become self-evident.

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