There’s a very peculiar tendency of investors to focus on things that don’t matter than on things that do. The frequency of SIP is one such things investors waste time over. A lot of people think a daily SIP is better than a monthly one. But the reality is, the frequency doesn’t matter.
Here’s a simple illustration of a daily, fortnightly and monthly SIP in Nifty from 1/1/2000.
Rs 100 invested in Nifty 50 daily from 1/1/2000 to 18/10/2022 would’ve earned a CAGR of 14.36%
Rs 1500 invested in Nifty 50 fortnightly from 1/1/2000 to 18/10/2022 would’ve earned a CAGR of 14.35%
Rs 3000 invested in Nifty 50 monthly from 1/1/2000 to 18/10/2022 would’ve earned a CAGR of 14.33%
Rs 9000 invested in Nifty 50 quarterly from 1/1/2000 to 18/10/2022 would’ve earned a CAGR of 14.29%
There’s no difference what the frequency is. It’s the same with dates either, choosing one date or the other doesn’t lead to better SIP performance in the long run.
Important things to focus on:
Keep things simple and focus on more important things like:
Your savings rate matters more than your savings.
Always ensure that you increase your SIPs every year as your incomes grow. Use the step-up SIP on Coin.
your asset allocation drives a large part of your portfolio returns. Ensure you decide on an asset allocation that allows you to sleep peacefully at night If your investments are keeping you awake, you are doing something wrong.
Don’t waste your time on pointless things like SIP frequency and dates. There are better things to do in life, such as watching Brahmastra.
Your human capital or your future earnings potential is your biggest asset. Focus as much as you can on developing it.
Do check out the Varsity chapter on " Introduction to Asset Allocation"
Feeling stupid as few have liked this line - meaning others have understood the joke or some connection… can some one tell me what the true meaning is…if possible…
Very informative. I was thinking if there would have been difference if x amount is invested if nifty ends in green and 2x amount if it ends in red. Rationale behind this is nifty has to only go up on a long run.
I had done a similar analysis (not only the frequency, but also the day of the week for weekly sips, date of the month for monthly sips etc.) and the results were slightly favouring low freq sips, i.e. monthly > weekly > daily - given the investment is at the beginning of the period.
And it made sense as the general market trend is upwards. So for sip investing, early the better - as it gives more time for the investment to grow. To explain, between a monthly sip of Rs.2000 on 1st of every month and Rs.100 everyday (assume 20 trading sessions in a month), the former gives more exposure and market time to my rupee investment.
To make it more intuitive, take this analogy: a lump sum of 12lakhs invested in 2012 (see it as a decadal sip) vs a monthly sip of 10k every month (12 lacs spread across 10 years) - which do you think would have given better returns?
The general market trend is upwards, so early the better!
P.S. - I understand, for all practical purposes, the difference is negligible for daily vs weekly vs monthly frequencies. But since I spent so much time in the analysis, couldn’t resist from sharing.
Not to think much. If our plan is to invest 30K per month. Split across 3 dates (lets consider- 3,13, 23) and create 3 SIP’s. SIP creation is one time process, with enach mandate money will be auto debited so no need to worry much.
In my experience, you’re better off keeping it simple. If not for anything, simple SIPs are easily manageable. In this case, you’ll have either manually track Nifty or build something else. To my mind, doesn’t make much sense. Simply, you can just increase the SIP amount periodically.
Noted. I won’t do it anyways. Just wanted to know if anybody has analysed the results.
I actually did it once long time back for 1 month using niftybees
I had some rules of my own.
But 50 units everyday if it’s green.
Buy additional 100 units for every fall of 1 percent. So if nifty falls 0.7 percent I buy 50 plus 70. Total 130.
There were rules to sell in parts as well.
Did it for some time. But then I was tired of it after 1 month.
Fully agree. I am invested in Nifty ETF. I use the allocated amount for the month to buy nifty etf as and when nifty falls or in the red in small parts across the month. Do not find it complicated at all.
Maybe it gets complicated when it is a sip and index fund
We haven’t reached there yet. When we become what Japan was 30 years back may be we will saturate. It’s a long way to go. I am very positive on Indian markets. Expecting 12 to 15percent cagr from nifty in the next 20 years.
So that makes nifty close to 3lakhs after 20 years. Can you even imagine?
Just like nifty has gone nowhere from past 1 year. I guess last year also we were at the same level at this time. The ones with strangle have made money.
They aren’t liquid enough. Just keep doing it week by week. But one big movement is going to eat away most of your profit. Even though last 1 year nifty has done nothing, it has gone to 15200 on the lower side and 18600 on the higher side. Not many would have held on to their position.
There is not much of a difference between a daily sip and a monthly sip. In fact I had seen one study wherein a bi-annual sip did better than all the other types of SIP.
Just Kidding
