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 on the best date for a SIP.

First, Let’s see what an SIP is.

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. 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 Mutual Fund?
• Analyzing SIP return for different dates
• Inference from the analysis
• Conclusion

Which Is The best Date for SIP Investment in Mutual fund?

Usually, all AMCs allow selecting any date between 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 select 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 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.

The period chosen is given below:

• 3 years – Jan 2019 – Dec 2021
• 5 year – Jan 2017 – Dec 2021
• 7 year – Jan 2015 – Dec 2021
• 10 year – Jan 2012 – Dec 2021

The above table clearly depicts that 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 5thand 15th.

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 (2012-2021)

• ICICI Prudential Blue-chip Fund Growth
• Axis Midcap Fund- Growth
• DSP Flexi Cap Fund- Growth
• Kotak Small Cap Growth

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

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

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 – 15.92%

Axis Midcap Fund- Growth – 22.53%

DSP Flexi Cap Fund- Growth – 16.87%

Kotak Small Cap Growth – 23.04%

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 – 15.92%
• Axis Midcap Fund- Growth – 22.80% 
• DSP Flexi Cap Fund- Growth – 16.87%
• Kotak Small Cap Growth – 22.18%

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 – 15.98%
• Axis Midcap Fund- Growth – 22.80%
• DSP Flexi Cap Fund- Growth – 16.87%
• Kotak Small Cap Growth – 232.04%

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

The Average Portfolio Return in Each Case

From the above table, it is clear that the difference between each case is meager . 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 on other spheres of wealth creation. 

What is that you learnt 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 termination of SIP investment by the fund house & the bank may penalize  for dishonouring the payment. So, make sure there is sufficient balance. 
• Either one date (close to the beginning of the month) can be set or splitting 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.

Or are you interested in creating a Comprehensive Financial Plan for your financial goals?

Skip the queue by registering for your 30 Minute FREE Financial Plan Consultation. Click the ‘Register Now!’ button below.