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Daily SIP vs Monthly SIP: Which Investment Plan Is Right for You?

Exploring daily SIPs versus monthly SIPs for optimal mutual fund investments

Your goals won’t wait, begin your SIP today with just Rs. 100 and start building your future

Article 15

Mutual funds are one of the most sought after instruments of investment in India today. Each day, thousands of investors are pooling in crores into trustworthy mutual funds with a vision to generate wealth in the long run. Moreover, in the past few years, with the rise of popularity of systematic investment plans or SIPs, mutual fund investments have become more accessible and affordable for the common mass. Yet, there are various methods with which you can make the most of your SIP investments.

What is a SIP?

A SIP or systematic investment plan is a method of investing a small amount of money into a mutual fund in fixed regular intervals such as daily, weekly or monthly. This method helps you gain a disciplined and structured approach to managing your mutual fund portfolio. Moreover, when you invest with SIPs, you do not need to keep an active track of the market changes since you have the power of rupee cost averaging helping you make the most of your investments.

Key takeaways

  • Daily SIPs provide better market averaging and reduced volatility risks while monthly SIPs are easier to manage with lower transaction costs.
  • Monthly SIPs align well with long term goals and regular income whereas daily SIPs suit investors with irregular cash flow or a need to mitigate short term changes.
  • Monthly SIPs provide simplicity and lower fees while daily SIPs may incur higher transaction costs and require more administrative effort.

Comparing daily SIP vs monthly SIP

The table below compares the basic features of daily SIP and monthly SIP:

Daily SIP

Monthly SIP

Daily SIP enables you to make small investments every trading day

Monthly SIP is the more traditional approach where investors set a fixed amount to be invested on a specific date each month.

When you invest via daily SIPs can help capture more market swings thus better averaging your total investment cost.

Investing on a monthly basis is easier to manage and more aligned with monthly income patterns such as salaries and pension.

By leveraging daily SIPs, the impact of market volatility is reduced since you invest at various points and not just a single day every month.

Since transactions occur only once a month, the associated transaction costs are lower.

It can instill a more disciplined investing habit that makes you more aware of your financial goals.

It is easier for many investors to commit to a monthly plan as they align with other regular payments like EMIs or utility bills.

Since transactions take place on a daily basis, you may incur higher transaction costs that eat into your profits.

When you invest once a month, you may expose your portfolio to more market timing risks that may impact your returns negatively in the short run.

Keeping a track of your daily investments can be tough for investors who prefer a simplified approach.

Unlike daily SIPs, monthly SIPs do not capture daily market fluctuations as effectively.

Daily SIPs come with better market averaging, but may provide lower returns compared to monthly SIPs due to its daily exposure to market volatility.

 


Also read: What Is Systematic Withdrawal Plan (SWP)

Factors to consider when choosing between daily SIP vs monthly SIP

The following are a few of the most important factors that you must consider before opting for a daily SIP vs monthly SIP investment:

  • Investment horizon: If you are looking at a short term investment, both daily and monthly SIPs can suit your needs well. However, for longer term goals the convenience and lower transaction costs of monthly SIPs make them more favorable.
  • Volatility tolerance: Daily SIPs help in mitigating market volatility, making it easier to handle psychological aspects of investing. Monthly SIPs might expose you to more pronounced market swings, but these average out the cost over time.
  • Budget and cash flow: For salaried individuals, monthly SIPs align well with their monthly income. However, if you have irregular or daily income, then daily SIPs could fit better with your cash flow.
  • Administrative convenience: Think about how you prefer to manage your investments. For people who like to keep things simple and less time consuming, a monthly SIP is easier to keep track of. Tracking daily SIPs can become tedious and counter productive for some investors.
  • Transaction costs: While the transaction cost might seem minimal, if you are investing small amounts daily, the fees can add up. Knowing about these costs associated with daily SIPs versus monthly SIPs is key to prudent investing.


Also read:
What Is Compound Annual Growth Rate (CAGR)

Build your wealth with SIP

Which SIP should I choose?

There is no one-size-fits-all answer when it comes to the choice between daily SIP and monthly SIP. It largely depends on your individual financial situation, investment goals, and risk tolerance.

 

If you are looking for simplicity, lower transaction costs, and have a predictable monthly income, a monthly SIP might be the right choice for you. On the other hand, if your cash flow is irregular and you intend to minimize market volatility impacts, a daily SIP could be more beneficial. Both methods offer unique advantages, and understanding these can help you make a more informed decision.

 

Are you planning on investing in mutual funds? Head to the Bajaj Finance mutual fund platform and discover over 1,000 mutual fund schemes. Use the Mutual Fund Calculator and compare mutual funds before choosing your next investment!

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Frequently asked questions

What is the main advantage of daily SIPs over monthly SIPs?

Daily SIPs offer better market averaging and help reduce the risk of market timing by spreading investments across more days.

Are there higher transaction costs associated with daily SIPs?

Yes, daily SIPs typically come with higher transaction costs due to more frequent trading, which can reduce overall returns.

Which SIP should I choose if I have a regular monthly income?

Monthly SIPs are more convenient for those with regular monthly income, offering lower transaction costs and easier management compared to daily SIPs.

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Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.

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Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319

BFL does NOT:

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(ii) carry customized/personalized suitability assessment.

(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.

In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

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Disclosure
: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.

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