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Daily SIP vs Monthly SIP: Which is Better?
Investing in mutual funds through a Systematic Investment Plan (SIP) is one of the most convenient and popular ways to build wealth over time. By putting in a fixed amount at regular intervals, SIPs encourage consistency and financial discipline in your investment journey.
Table Of Content
- What is a Daily SIP?
- What is a Monthly SIP?
- Difference Between Daily SIP vs Monthly SIP
- Benefits of Daily SIP in Mutual Funds
- Benefits of Monthly SIP in Mutual Funds
Traditionally, most people prefer monthly SIPs since they match well with salary inflows and are easier to manage and track. But with changing investor preferences, daily SIPs are also gaining attention, offering the option to invest in smaller amounts more frequently.
Here is more information about daily and monthly SIPs, weighing their benefits and limitations, so you can choose the approach that best fits your financial goals and comfort with risk.
What is a Daily SIP?
A daily SIP means investing a fixed sum into a mutual fund on every working day. Instead of putting in money just once a month, this method spreads your investments across the entire month, helping to balance out market ups and downs. It works especially well for people who earn daily or irregular incomes, such as freelancers, traders, or small business owners. By contributing small amounts regularly, daily SIPs promote disciplined investing and make rupee cost averaging more effective since you’re investing more frequently.
Daily SIPs function just like regular SIPs, but with a higher frequency. The biggest advantage is that they help smooth daily market fluctuations, lowering the chances of taking a big hit on a single day’s investment. Since markets move every day, investing in smaller chunks reduces the risk of mistiming the market.
What is a Monthly SIP?
A monthly SIP, on the other hand, involves investing a fixed amount once every month into a mutual fund scheme. This is the most widely chosen SIP option, particularly among salaried individuals who receive their income monthly. Monthly SIPs encourage financial discipline, make tracking easier, and blend seamlessly with long-term planning goals.
With monthly SIPs, investors just need to ensure their bank accounts have enough balance for the scheduled deduction. They are generally seen as more convenient and less demanding to monitor compared to daily SIPs. Since they align well with traditional budgeting and monthly income cycles, they remain the go-to choice for most investors.
Difference Between Daily SIP vs Monthly SIP
Aspect | Daily SIP | Monthly SIP |
Investment Frequency | Contributions are made every business day | Investment happens once a month |
Investment Amount | Small amounts invested regularly | Larger amount invested at longer intervals |
Rupee cost averaging | Averaging takes up more space more frequently | Averaging occurs only once a month |
Compounding benefits | Can enhance OCP as an investment daily | Provides steady compounding over the long run |
Convenience | Works best with automation to avoid daily effort | Simple to manage, and easier to track |
Flexibility | Offers more flexibility for those with variable incomes | Less room for frequent adjustments |
Monitoring Effort | Needs closer tracking due to daily activity | Minimal effort required to manage |
Benefits of Daily SIP in Mutual Funds
Power of compounding
With daily contributions, the compounding effect can work more effectively over time. Since returns start building on even the smallest daily investments, the potential for long-term growth increases.
Rupee cost averaging
Investing every day means buying mutual fund units at different price points. This helps lower the overall average cost of purchase, which can be especially helpful during market volatility. (Read more about how rupee cost averaging works in SIPs)
Smoother volatility management
Because investments are spread out across many days, sudden market ups and downs have less impact. This reduces the risk of putting in a large sum on a single day when the market happens to be high.
Greater flexibility
Daily SIPs work well for those with irregular or variable incomes. Investors can put in small amounts each day, making it easier to manage cash flow without disrupting their budget.
Lower market timing risks
Since investments are made consistently every business day, there’s no need to worry about choosing the “right” day to invest. The spreading out of contributions naturally reduces the risk of mistiming the market.
Suggested Read: Build Your First Mutual Fund Portfolio: A Beginner's Guide
Benefits of Monthly SIP in Mutual Funds
Easy to manage and track
Investing once a month is simple and hassle-free, which makes it ideal for long-term investors. Since monthly investments are easier to monitor, this option works well for anyone who prefers a more hands-off approach.
Encourages disciplined saving
Monthly SIPs go hand in hand with a structured budget. By setting aside a fixed portion of income each month, investors can manage expenses better while consistently building their investment corpus.
Convenient setup
With auto-debit facilities, monthly SIPs require minimal effort. Once the plan is in place, there’s no need to remember or make payments every day since it runs on autopilot.
Better expense planning
Since the deduction happens only once a month, it becomes easier to allocate money for essential needs first and then set aside funds for investments.
Perfect fit for salary cycles
For salaried individuals, monthly SIPs are highly practical as they align with monthly income. This ensures a smooth and systematic way to grow wealth over time.
Suggested Read: SIP Investment: What’s the Best Time to Start?
Both approaches come with their own advantages. Daily SIPs spread out investments more evenly, offering stronger rupee cost averaging and better protection against market volatility. On the other hand, monthly SIPs are popular for their simplicity, discipline, and convenience, making them a favourite for most investors.
The right choice ultimately depends on your income pattern, financial goals, and comfort with risk. For many people, monthly SIPs remain the go-to option because of their practicality. However, those who actively manage their money and want to maximise cost averaging may find daily SIPs a better choice.
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