Monthly SIP vs Daily SIP – Difference & Which is Better

Monthly SIP vs Daily SIP: You probably already know about SIPs (Systematic Investment Plans) if you invest in mutual funds. SIPs have emerged as the preferred method for investing in mutual funds, particularly equities funds, throughout the past few years. The advantages are obvious. SIPs allow you to make tiny investments that grow into a sizable corpus. Additionally, you get to develop investing discipline and average your investment costs—a process known as rupee cost averaging. To determine your expected returns on investments, you can use tools such as SIP Return Calculators.

But which is better? Monthly or Daily SIP?

Which one is better? Monthly SIP vs Daily SIP

There is no clear answer as to which is better between monthly SIP (Systematic Investment Plan) and daily SIP, as it largely depends on an individual’s investment goals, risk tolerance, and income frequency.

Monthly SIP

• In a monthly SIP, an investor contributes a fixed amount every month on a designated date. This allows for easier budgeting and planning as the same amount is deducted from the investor’s account each month.
• This method is suitable for individuals who receive a monthly income and prefer to manage their investments on a monthly basis.
• A monthly SIP also allows for better tracking of investments and makes it easier to monitor the performance of the portfolio.

Daily SIP

• In a daily SIP, an investor contributes a fixed amount every day. This can be an attractive option for individuals who receive daily or irregular income streams.
• Daily SIPs allow for smaller amounts to be invested more frequently, which can lead to better cost averaging and potentially lower the overall average purchase price.
• However, the cost of processing daily transactions may be higher compared to monthly SIPs, which can have an impact on the overall returns.

Now! Let’s consider an example with an investor in India who wants to invest Rs. 10,000 per month in a mutual fund with a daily SIP option and a monthly SIP option.

Monthly SIP:
– With a monthly SIP, the investor contributes Rs. 10,000 on the 1st of each month, resulting in a total investment of Rs. 1,20,000 over the course of the year.

Daily SIP:
– With a daily SIP, the investor contributes approximately Rs. 333.33 per day, resulting in a total investment of Rs. 1,20,000 over the course of the year.

In this scenario, both options result in the same total investment amount of Rs. 1,20,000 over the year. The choice between monthly and daily SIP will depend on the investor’s income frequency, budgeting preferences, and investment strategy.

It’s important to note that with a daily SIP, the investor will be making smaller and more frequent investments, potentially leading to better cost averaging. However, the cost of processing daily transactions may be higher compared to monthly SIPs, which can have an impact on the overall returns.

Ultimately, the decision between monthly SIP and daily SIP will depend on the investor’s individual circumstances and preferences.

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