Revealed: Which is The Best Date for a SIP in a Mutual Fund?

As an investor, you may have a few questions in mind like:

When to invest in a SIP?

Which is the best date to invest in a SIP?

How to choose the best date for SIP?

To discover the answers, stay till the end of the article. You will get all your questions answered. We have made an in-depth analysis of the best date for a SIP.

Mutual Funds offer flexibility to invest and withdraw your investments in the most tax-efficient way. You can invest in Mutual Funds either through lump sum investment or through SIP.

Mutual Funds are flexible and transparent investment options for you to invest as per your risk profile. You can invest in equities, debt, gold, etc in the ratio of your choice through the Mutual Fund route.

These are tax-friendly options too compared to other investments.  Here, your savings will be managed by Fund Management experts.

As you know, the investment in equities will give better returns, only if invested in the long term. Equities require 7-10 years to give any meaningful returns.

If you are investing for short-term goals, it can be done ideally through Debt Mutual Funds or through Balanced Mutual Funds.

First, Let’s see what a SIP is.

SIP Full Form – Meaning

SIP full form is Systematic Investment Plan.

What is SIP investment and how does it work in Mutual Funds?

SIP is the most common term used by all investment advisors. This is a simple way of investing in Mutual Funds.

It is like a bank recurring deposit, where you commit to investing a fixed amount every month on a particular date for a particular period. You fix the amount according to your financial goals and invest it regularly. You can issue post-dated cheques or can opt for the ECS facility.

SIP is an easy & disciplined method of investing under which a pre-agreed amount is invested at a predetermined frequency in a mutual fund scheme.

The primary benefit of SIP is Rupee cost averaging. A fixed amount is invested over a long period of time under different market situations which will help to reap the rupee cost-averaging benefit.

This will average out your cost and you will benefit when the market rises in the long term. This type of investment is ideal and simple because you need not worry about the levels of the market.

Thus, it helps in lowering the cost of investment while grabbing the advantage of the power of compounding. For a recurring payment, one has to set up an e-mandate/ auto-debit.

Now let’s discover which is the best date for SIP.

Table Of Content

Which Is The Best Date for SIP Investment in a Mutual Fund?
Analyzing SIP returns for different dates
How to decide the SIP date for each of the funds?
Fund Return for different SIP dates (10-year return)
The Average Portfolio Return in Each Case
Inference from the analysis
Conclusion

Which Is The Best Date for SIP Investment in a Mutual Fund?

Usually, all AMCs allow selecting any date between the 1st & 28th. Few try to choose the SIP at the beginning of the month or based on their cash flow (salary credit) and few look for the end of the month where the volatility is high due to F&O expiry. Is this a correct approach to selecting the best dates for doing your SIP?

So what should you be doing?

To discover which will be the best date to invest in a SIP, we will now analyze the SIP returns for different dates.

Analyzing SIP returns for different dates

For the analysis, we will consider the ICICI Prudential Blue-chip fund. The SIP returns for different tenures (3-, 5-, 7- & 10-year period) on different dates (5th, 10th, 15th & 25th) is summarized in the table below.

ICICI Prudential Blue-chip Fund Growth	25th	15th	10th	5th
3-year Return	16.17%	15.79%	15.62%	15.92%
5-year Return	16.18%	15.94%	15.79%	15.82%
7-year Return	14.54%	14.43%	14.36%	14.38%
10-year Return	14.38%	14.31%	14.29%	14.29%

The period chosen is given below:

• 3 year – Jun 2020 – May 2023
• 5 year – Jun 2018 – May 2023
• 7 year – Jun 2016 – May 2023
• 10 year – Jun 2013 – May 2023

The above table clearly depicts that the difference between each is marginal & negligible. Don’t care about these two pence when you are building wealth in the long run. At some places, it’s almost the same, for example – 10-year return on 5th and 10th.

The above analysis is a simpler one. But, in real-time there will be around 4-6 funds in the portfolio.

How to decide the SIP date for each of the funds?

Will the date play a significant role in determining the average portfolio return in the long run?

Let’s find out. Let’s consider 4 funds for this analysis – for a 10-year return (2013-2023)

ICICI Prudential Blue-chip Fund Growth

• Axis Midcap Fund- Growth
• DSP Flexi Cap Fund- Growth
• Kotak Small Cap Growth

Fund Return for different SIP dates (10-year return)

The below table shows the 10-year returns of the 4 funds on various dates:

Name of the fund & Date	25th	15th	10th	5th
ICICI Prudential Blue-chip Fund Plan-Growth	14.38%	14.31%	14.29%	14.29%
Axis Midcap Fund Growth	16.96%	16.87%	16.87%	16.81%
DSP Flexi Cap Fund Growth	13.9%	13.82%	13.79%	13.78%
Kotak Small Cap Growth	19.51%	19.41%	19.37%	19.34%

Now let’s analyse these fund returns in 3 different scenarios.

Case 1 – All SIP returns on the same date – 15th 

In the first case, we consider the SIP returns of all the funds on the 15th 

ICICI Prudential Blue-chip Fund Growth – 14.31%

Axis Midcap Fund- Growth – 16.87%

DSP Flexi Cap Fund- Growth – 13.82%

Kotak Small Cap Growth – 19.41%

Case 2 – Each SIPs on each date – 5th, 10th, 15th & 25th respectively

In the second case, we consider the SIP returns of all the funds on all the dates

• ICICI Prudential Blue-chip Fund Growth – 14.29%
• Axis Midcap Fund- Growth – 16.87%
• DSP Flexi Cap Fund- Growth – 13.82%
• Kotak Small Cap Growth – 19.51%

Case 3 – Splitting – Two SIPS on one date (10th) & Balance two SIPs on another date (15th) 

In the third case, we consider the SIP returns of all the funds on two different dates 

ICICI Prudential Blue-chip Fund Growth – 14.29%

Axis Midcap Fund- Growth – 16.87%

DSP Flexi Cap Fund- Growth – 13.82%

Kotak Small Cap Growth – 19.41%

Now let’s find the average portfolio return in each case.

The Average Portfolio Return in Each Case

Case	SIP Date	Average Portfolio Return
Case 1	All SIP returns on the same date – 15th	16.10
Case 2	Each SIPs on each date – 5th, 10th, 15th & 25th respectively	16.12
Case 3	Splitting – Two SIPS on one date (10th) & Balance two SIPs on another date (15th)	16.10

From the above table, it is clear that the difference between each case is meagre. As an investor, your aim is to have an investment discipline in order to meet your financial goals. This analysis clearly shows that you have to shift the focus to other spheres of wealth creation.

What is that you learned from the analysis? Let’s jot down the inference from the analysis.

Inference from the analysis:

• There is no significant gain in the return by selecting any particular SIP date.
• Consistency is the key factor in investing & that too in the long run.
• Pay attention to the overall investment allocation to achieve the goals rather than focusing on the SIP dates.

Conclusion:

So how will you choose your SIP date?

• Choose a date close to your salary credit/cash inflow.
• Invest first and allocate money for essential expenses, so that you will be left with little money for discretionary expenses.
• Missing continuously 3 SIPs leads to the termination of SIP investment by the fund house & the bank may penalize for dishonoring the payment. So, make sure there is sufficient balance.
• Either one date (close to the beginning of the month) can be set or splitting it among two dates makes sense & hassle-free. Depending upon the risk tolerance & investment objective (goal), selecting an appropriate mutual fund scheme & continuing the SIP is the paradigm.

If you have any comments or questions, write them in the comment box below.

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