SIP, which stands for Systematic Investment Plan, offers a method for regularly investing money in mutual funds or stocks. Investors often inquire about the optimal date within a month to commence their SIP investments.
Commonly employed in mutual fund investments, a SIP enables investors to allocate a predetermined sum at regular intervals, typically on a monthly basis, into a chosen mutual fund. Regarded by many as a convenient and disciplined approach to investing, SIP allows investors to navigate market fluctuations with a sense of consistency and order.
Best date to start SIP in month
Experts believe the ideal approach is to stay invested instead of finding the right time to invest and start with a long term SIP on any date of your choice.
According to Anil Ghelani, CFA, head- passive investments and products, DSP Mutual Fund, the best date to start a SIP, is today!
“Never try to time the market – rather focus on the time in the market. Similar is the case for SIPs in equity mutual funds. If we take historical data of the past 20 years, a SIP investment started on any date of the month, would have given very similar returns in a close range, with a gap of less than 0.25% annualised returns. This is without taking any particular fund, but just the returns of Nifty 50 TRI Index as an example,” Ghelani said.
He added that in most fund houses, there is full flexibility and you can select any date of the month for your SIP. If your birthday is on the 13th and you feel it’s your lucky date, go ahead and start with a SIP on Friday the 13th, he said.
Varun Girilal, managing partner, Scripbox, said that a SIP in an equity fund is potentially the most significant plan to ensure long-term wealth creation. There is often ambiguity around the best time or day to have a SIP planned from the bank account.
“For SIPs or any other investment for that matter, the ideal approach is to stay invested instead of finding the right time to invest. If you look at a long-term SIP, say 10 years, the starting date does not matter. For a 10-year SIP investing rolling period, whether you make your SIP at the start, middle or end of the month, the returns are likely to range between 15.50% to 16%,” Girilal suggested.
Girilal added that the this clearly reinforces the point that a successful SIP is more about;
- Starting early
- Maintaining the discipline of investing regularly
- Investing for the long term (10 years+) to achieve financial goals rather than specifying date, frequency, etc.. The focus should be on maintaining consistency in investing, for which, SIP automatic debit can be set up within 1-3 days of the salary credit day or the start of the month.
Ghelani also added that a mistake an investor often makes is to try and time our SIPs.
“We should always remind ourselves that as investors, our most important financial goals are usually aligned to simple things of life, like buying a new car, the happiness of our family, better life for children, starting or expanding a business. Some of us often get preoccupied with the wrong priorities – like increasing returns at all costs or trying to time the market.”
“My suggestion would be to always remember this point, start with a long term SIP on any date of your choice, not get worried by short term volatility and give your investment a better chance to do well for you over time,” Ghelani underlined.
What Are The Benefits Of Investing Through SIPs?
Rupee cost averaging: The investor can take advantage of market volatility and can buy more units when the market is down and fewer units when the market is up. This helps to average out the cost of investments.
Disciplined investing: SIPs help investors to cultivate the habit of saving and investing on a regular basis.
Flexibility: Investors can start a SIP with a small amount of money and increase the amount over time as their income grows.
Before engaging in SIPs, it’s important to consider several factors to make informed investment decisions. Here are key aspects to be aware of;
Goals: Clearly define your financial objectives, whether it’s wealth creation, education funding, retirement planning, or other specific goals. Your goals will influence the choice of funds and the investment horizon.
Research Funds: Thoroughly research and select mutual funds that match your financial goals and risk profile. Consider factors such as fund performance, historical returns, fund manager expertise, and expense ratios.
Risk Tolerance: Understand your risk tolerance level. Different mutual funds carry varying degrees of risk. Assess your comfort level with market fluctuations and align your investment choices accordingly.
Consistency in Contributions: Commit to making regular contributions, as the effectiveness of SIPs is derived from consistent and disciplined investing. Choose an affordable investment amount that you can comfortably sustain over the long term.
Market Conditions: While SIPs are designed to mitigate the impact of market volatility, it’s essential to stay informed about economic conditions and market trends. Be prepared for fluctuations in the value of your investments.
Review and Adjust: Periodically review your investment portfolio and make adjustments as needed. Changes in financial goals, risk tolerance, or market conditions may warrant modifications to your SIP strategy.
Professional Advice: Consider seeking advice from a financial advisor. A professional can provide personalized guidance based on your unique financial situation and goals.
Investors must note that mutual fund investments are subject to market risks, and reading scheme related documents carefully is important before investing. Investors should review the scheme prospectus carefully and obtain expert professional advice with regard to specific legal, tax and financial implications of the investment in any scheme.
