Becoming a millionaire after retirement will be like a dream come true. There are many ways to get rich but one of the most favorable ways would be investing in regulated instruments. At present, there are vast investment options available to browse and park your hard earned money. Systematic Investment Plans (SIPs) offered by mutual funds are said to have emerged as a household name. SIPs are packed with a lot of benefits and have the potential to give returns in the crores in the long run. But often the question comes that how much frequency is required for SIP. Money makes money and in order to achieve its desired goal, one needs to invest accordingly.
should you invest 1,000 on monthly basis sip, either 5000 on a weekly basis? Is Is investing 10,000 per month through SIP enough to achieve your goals? Or should you invest on a daily basis? Or is weekly investing better? What exactly is the best amount to earn maximum returns in SIP? And the list of questions goes on.
In SIP, there is hardly any difference in returns, irrespective of the investment you decide to make. You don’t even need to burden yourself outright Investment You can also become a millionaire by investing the amount 1,000 on a daily basis.
To provide investors with an overall picture and help them make better informed decisions for their investments through SIPs, WhiteOak Capital Mutual Fund said in a study, “A historical data analysis given below reveals That, in the long run, it hardly matters if the investor invests through daily, weekly or monthly SIP frequencies. All three frequencies generate somewhat similar returns (% XIRR).”
In an analysis, White Oak takes into account a small amount of money invested regularly for a long period.
As per their data, even if an investor makes SIP installment 1,000 on a daily basis, or more 4,700, or more on a weekly basis 20,000 on monthly basis. The rate of return is somewhat similar for all three of these frequencies. Their data shows that the rate of return for S&P BSE Sensex TRI is the same 14.3% for SIPs between September 1996 and September 2022, irrespective of the frequency.
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Instead of worrying about the frequency chosen for the SIP, what matters more is to start the SIP early and continue it for a long time.
WhiteOak’s note states, “Starting a SIP early and running it for a longer duration is more important than what frequency one chooses!”
Furthermore, WhiteOak said, “Only in retrospect will we know which would be the best days to invest in the course of a month. It is impossible to consistently time market levels.” He believes that waiting for the right time to invest can miss opportunities.
Furthermore, the WhiteOak study noted, “there is a more significant disadvantage than not investing at all in entering an unfavorable market.” It further added, “Even the worst market times will help the funds grow.”
The study showed that even the most unlucky people who invested during the worst day of the month managed to earn a return of 14.1%. Whereas the return for the lucky one who invested during the best day of the month was 14.6%. Whereas for the most disciplined people investing every 15th of the month the return is around 14.3%. The data takes into account the %XIRR for S&P BSE Sensex TRI for SIPs between September 1996 to September 2022.
It needs to be noted whether past performance may or may not be sustained in future.
In WhiteOak’s view, it is market time, not market time.
SIP is one of the most convenient and affordable investment options available in India. A fixed amount is invested in mutual funds once a month through SIP. Here, the investment amount can be as low as 500. Accordingly, SIP eliminates the need for lump sum investment and provides flexibility to investors in their financial planning. They also have tax benefits.
SIP is a disciplined form of investment where your desired amount is deducted from your bank account without the hassle of writing a check every time, on a stipulated date of a month.
According to AMFI, SIP is a simple method for long-term investment, one who is disciplined and committed to a fixed amount for a fixed period and stick to this schedule irrespective of the market conditions.
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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