Systematic Investment Plans (SIPs) enable investors to put money into mutual funds in installments rather than in one large lump sum. Although monthly SIPs are common, there are people who think that making investments on a daily basis is also another good approach. The two methods are helpful in cultivating investment discipline; however, they vary in terms of installment frequency, convenience and mode of unit purchasing. It is always useful for investors to know the differences between these methods, as they may help them make their choice based on their personal needs and objectives.
What is a Daily SIP in Mutual Funds?
In a daily SIP mutual fund, an individual makes an investment of a fixed amount to a mutual fund scheme on every eligible investment day, depending on the SIP facilities offered by the fund house.
Unlike a monthly SIP where there is one single investment per month, a daily SIP ensures that the investment is done through multiple days.
For instance, an individual can invest Rs. 100 every day via a daily SIP. This investment will be made on all the eligible days, and the number of units acquired depends on the prevailing NAV.
A daily SIP enables individuals to spread out the investment at various levels of the market. The actual number of days and the amount of money to be invested depend on the facilities provided by the mutual fund scheme.
How Does a Monthly SIP Work?
A monthly SIP involves investing a fixed amount on a selected date every month. Investors can choose an amount based on their income and savings capacity.
For example, an individual may invest ₹3,000 every month in an equity mutual fund. The amount is automatically debited from the registered bank account according to the SIP mandate.
The number of units purchased depends on the NAV applicable to that investment date.
Monthly SIPs are popular because they can be aligned with regular salary payments and household budgets. Investors also find them easier to track because contributions take place once a month.
Daily SIP vs Monthly SIP: Key Differences
Both investment methods follow the same basic principle of regular investing, but their contribution schedules differ.
| Basis | Daily SIP | Monthly SIP |
| Investment frequency | Every eligible investment day | Once a month |
| Contribution amount | Smaller daily instalments | Larger monthly instalment |
| Budget planning | Requires regular fund allocation | Easier to align with monthly income |
| NAV exposure | Spread across more investment dates | Limited to one investment date each month |
| Tracking | More frequent transactions | Fewer transactions |
| Convenience | Depends on the available facility | Generally easier to manage |
How Does Rupee Cost Averaging Work in Daily SIPs?
The rupee cost averaging technique involves making investments in mutual funds at varying NAVs.
If the NAV drops, the number of units purchased will be high due to constant investment amount. If the NAV goes up, the units purchased are few due to constant investment amount.
Since daily SIP makes more investments within the period as compared to monthly SIP, it will make more investment dates and will be exposed to various NAVs during the month.
However, the above advantage will depend on the market performance. In case the markets go up, early investment can be more profitable than SIPs.
Can a Mutual Fund SIP Calculator Help Compare Both Options?
A mutual fund sip calculator can help investors estimate the potential value of regular investments over a selected period.
Investors can use such a calculator to understand how contribution amounts, investment duration and assumed returns influence the estimated corpus.
For example, consider two investment schedules:
- Daily SIP: ₹100 on each eligible investment day.
- Monthly SIP: ₹2,000 once every month.
The total investment amount may differ because the number of eligible business days changes each month. Therefore, investors should compare both methods using similar total contribution amounts.
Advantages and Limitations of Daily SIPs
Daily SIPs offer certain benefits, but they may not suit every investor.
Advantages:
- Spread investments across more NAV dates.
- Allow smaller individual contributions.
- Encourage regular investment habits.
- Reduce dependence on selecting one investment date.
Limitations:
- Require more frequent contribution planning.
- May create additional transaction records.
- Can be less convenient for individuals with monthly income.
- Do not guarantee better returns than monthly SIPs.
Investors should also check whether the fund house supports daily SIPs and review the applicable minimum investment amount and mandate conditions.
Conclusion
Daily and monthly SIPs are different ways of investing in mutual funds. Daily SIPs involve investments on more NAV dates than monthly investments do. However, none of these methods is associated with better profits or elimination of market risks. The investors are supposed to choose the way which suits them, depending on their incomes and other financial issues. The tool 5paisa Alpha can help to get acquainted with information about mutual funds and tools of investing.
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