Is there a right date for SIP?

By Morningstar |  06-07-18 | 

Which is the right date for SIP investment per month?

- Sridharan

A Systematic Investment Plan, or SIP, allows an investor to invest a fixed amount regularly in mutual fund schemes.

It allows the individual to deploy the principle of rupee cost averaging to take advantage of market volatility. When the net asset value, or NAV, of a fund is high (typically when markets have risen) fewer units of a fund would be purchased from the investment amount. Conversely, when the NAV is lower, more units of a fund would be purchased with the same investment amount. Thereby, reducing the average cost of units purchased over a period of time. This does away with the need to time the market, which is very difficult to successfully and consistently do over multiple markets and business cycles.

So the decision to invest in the market via a SIP is excellent.

Fixed dates are provided and the investor has to make a pick from them; say, 1st, 10th or 20th amongst other options.

There have been advisers who have stated that one must break up their SIP. So assume you are investing Rs 2,000 per month in a fund, break it up into two instalments during the month at Rs 1,000 each. We honestly do not think it is necessary. Unless the amount being invested is significantly large.

There is no best date to invest. The reason so many options are given is to give the individual investor some amount of flexibility. But the choice is personal.

From an investment discipline point of view, investments should be made as soon as one receives their regular income. For most individuals this would typically be at the start of the month. This helps one to prioritize their long-term investments over discretionary spending.

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Sri Jayu
Jul 6 2018 06:48 PM
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