What is the best frequency for equity SIPs - Daily, weekly or monthly?

Systematic investment plan (SIP) investments are on the rise in India. According to data revealed by the Association of Mutual Funds in India (AMFI), the total SIP amount collected in January 2024 amounted to ₹18,838 crore. While planning to start an SIP online, investors often wonder about the most ideal frequency of investing in an SIP. Investing in equity mutual funds in India involves exposing one’s portfolio to a considerable amount of risk and requires the investor to regularly re-assess their investment. Read on to know tips on how often you must make an equity SIP investment.

The types of SIP investments based on their frequency:

Investors generally categorise SIP mutual fund investments into three categories based on the investor’s choice of the frequency of investment – daily SIPs, weekly SIPs, and monthly SIPs. Of these three categories, daily and monthly SIP investments are more popular.

What is the best frequency to invest in an SIP?

Here are some points that you must consider before choosing the frequency of your SIP investments:

• Investing in small and mid-cap funds through daily SIPs could offer lower returns: Small-cap funds invest in companies that have a lower market capitalisation, and therefore, are highly volatile. Investing in a small-cap fund when the market is declining could lead to higher losses. On the contrary, when the market is high, investing daily in a small-cap fund can yield higher returns. However, you can expect stable and higher returns by investing in large-cap funds through daily SIPs.

• The efficacy of daily SIPs depends on the fund’s management: You must assess the mutual fund’s management strategies before investing since the returns of daily SIPs depend on the efficiency of the fund’s management.

• Monthly SIPs are better suited for people who earn monthly salaries: It is advisable for investors who earn daily wages to invest in daily SIPs. Monthly SIPs, on the other hand, are ideal for people who earn monthly salaries. Investors must ideally select the SIP date a few days after the date on which they receive their salaries.

• You can monitor your monthly SIPs more efficiently: Opting for monthly SIPs is the best way to plan a mutual fund investment. Investors must also use an SIP investment calculator to better plan their monthly SIPs. Also called “SIP calculator”, these are free, online tools that can help investors determine the ideal tenure and investment amount for their SIP investments.

• Tracking daily SIPs is difficult:  Since investors who choose daily SIPs have multiple entries of purchase in their account, it is a lot more convenient for investors to track their monthly SIP contributions as opposed to tracking their daily SIP amounts.

Before deciding on the frequency of your SIP investment, you must use an SIP return calculator to analyse your returns. A mutual fund SIP calculator can help you develop clarity on how to invest in mutual funds – through monthly SIPs or daily SIPs. You must also regularly re-assess your SIP investments to check if they are aligning with your investment objectives.

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