One of the top queries1 of the investors is around the date and the frequency of doing SIP investments. Many investors believe that a particular day of the month, or a particular frequency can help them optimize their investment returns. But is it really the case? Let's dive deep and analyze:
The analysis:
For this, we have considered 3 different indices for a period of over 18 years. To understand the SIP performance for each date, we did a scenario analysis for 31 different dates, say one takes exposure to these three different indices every month on the same date. Here is what we found:
We also did the same analysis on the same set of indices considering different frequency of investing - Daily, Weekly, Monthly, Half-Yearly. Here is how it looks like:
The result:
As it is fairly evident from the analysis above, there is hardly any difference in the performance of the investment if the SIP is done on a particular date, or with a higher or lower frequency. At least the past data indicates that there is no specific date of the month that gives better SIP returns.
The takeaway:
The takeaway for the investors here is that they should ignore the noise associated with any date or any frequency of doing an SIP.
Rather, investors may start the SIP on whichever date and frequency that they are comfortable with. Typically, investors tend to align their SIP dates with their expected cash flow, so that they can stick to the plan without worrying about the available cash in their bank account.
For example, a salaried person may consider starting an SIP 2-3 days after their salary credit date. Similarly, a person with rental income may align it with the date they expect their rent to come in. On the other hand, a businessman may set the frequency and date according to their business cash flow.
Summary:
The performance difference between different dates and frequency is insignificant over the long run. Hence, investors should align their SIP date and frequency to optimize for their convenience.
1 based on responses and feedback received by the customer care team of Zerodha Fund House.
Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments.
The data shown above pertains to the Index and does not in manner indicate performance of any scheme of the Fund.
The names of NSE indices mentioned in this article, such as Nifty LargeMidcap 250 and others, are trademarks of the National Stock Exchange of India (NSE). Their mention is solely for informational purposes and does not imply any endorsem*nt by NSE. The content provided here does not contain data from these indices and should not be taken as financial advice.
Mutual Fund Investments are subject to market risks, read all scheme related documents carefully
This article or document has been prepared on the basis of internal data/ publicly available information and other sources believed to be reliable. The information contained in this article or document is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party in any manner. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article or document.
Published on May 3 2024
