How frequently should you invest in mutual funds – Daily, weekly or monthly SIPs?

When investing over a long period of time, SIP frequency, whether daily, weekly, or monthly, has little impact on overall returns

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Shailesh Khanduri
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SIP Mutual Funds Personal Finance

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New Delhi: Many investors are happy investing regularly through monthly systematic investment plans (SIPs). However, some are curious to know if increasing the frequency of their SIPs would lend them some added benefits. While many are familiar with monthly SIPs, they also ask if investing on a daily or weekly basis would reap more benefits. For example, if you invest Rs 30,000 monthly (via monthly SIPs), you can invest Rs 1000 SIP per day or weekly SIPs of Rs 7500.

A close look at how one invests in mutual funds through regular SIPs makes one ponder if it makes sense to park money on a daily or weekly basis. Basically, SIP is a very simple concept. One must invest regularly to offset investment costs. Also, if you are investing in mutual funds over the long run through a SIP, it can be very helpful in averaging initial costs. Considering how SIPs simplify our investing behaviour, does it make sense to complicate the process by simply increasing the frequency of our SIPs? Investing through SIPs as an idea was started to make things easier. After all, the simplest idea is always the best idea.

When investing over a long period of time, SIP frequency, whether done on a day-to-day, weekly or monthly basis, has little impact on overall returns. Using historical data and analysing some numbers, we can see that sometimes a monthly SIP works well and sometimes a daily or weekly SIP works well. In another scenario, some funds perform better with weekly/daily SIPs, while others perform slightly better with monthly SIPs.

Going forward, there is no way to predict the optimal frequency for any particular fund. So if you need to start a SIP with four funds, for example, an index fund, a flexicap fund, a midcap fund and a large-cap fund in 2023, there is no way to know which SIP frequency will give you better returns in the coming decade.

Trying to set the SIP frequency to something other than monthly may prove to be a futile exercise. You may assess and evaluate the same for fun and out of curiosity. However, serious investors need not worry about their choice of SIP frequencies. Select monthly, and be done with it.

Think beyond SIP frequency

There are far more important considerations when investing in mutual funds than determining at what frequency you wish to invest in them. Choosing the right funds in sync with your financial goals, choosing between active and passive funds, and deciding to invest the right amount have a more overbearing effect than titillating between daily, weekly and monthly SIPs.

If you haven't invested the right amount or don't have the right funds in your portfolio, it doesn't matter if you SIP into these funds monthly or daily. Make equity investments in addition to your regular SIPs when the market is adjusting down if you want to profit from your SIP investments and increase your returns. This is much more effective than increasing or decreasing the SIP frequency.

A daily SIP may be appropriate for some types of investors, but it may turn out to be unnecessarily cumbersome for the remaining others. You simply have to invest monthly. You will come across many smart people trying to convince you to go for a daily SIP though there is historical data to validate its effectiveness over other SIP modes. However, there is no way to know for certain if the past will repeat itself. So, don't complicate your financial life unnecessarily. Simply choose to park your earnings in investments via monthly SIPs.

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