How to Choose SIP Dates for Mutual Funds?

Do you want to invest regularly in mutual funds? Are you looking for a way of investing in mutual funds without timing the market? You may consider putting money in a mutual fund scheme of your choice through the systematic investment plan or SIP. It is a method of setting a fixed amount regularly in a mutual fund scheme of your choice. You could invest in equity funds at all levels of the stock market through the SIP, and average out your investment cost over time. However, which are the best SIP dates for mutual funds?

What is the rupee cost averaging?

You may consider investing in equity funds when the stock markets are low and redeem when markets are high to earn maximum returns. However, you may find it difficult to time the stock markets. You could consider investing in equity funds through the SIP or the systematic investment plan.

It helps you put a fixed amount regularly in mutual funds of your choice. You may purchase more mutual fund scheme units when markets fall and lesser units when stock markets rise. You could average out the cost of your mutual fund units over some time called rupee cost averaging.

How to choose SIP dates for mutual funds?

You may consider choosing the SIP date for mutual funds as per your convenience. For example, you could choose the SIP date around the time you get your salary. You could set up an e-mandate for SIP in mutual funds. It helps you schedule automatic transfers from your bank account towards mutual fund investments. 

Studies have shown that you don’t earn a substantially higher return by investing in mutual funds through SIP at the beginning, or the end of the month over some time. You may choose the best SIP dates for mutual funds based on your comfort levels. 

You could consider investing in mutual funds through SIP at the beginning of the month, as this is the time you get your salary. It helps you prioritise your investments over discretionary spending. You would have sufficient funds in your bank account for your SIP transaction to go through. 

Some mutual fund houses may offer the daily SIP option in mutual funds. You could invest a fixed sum of money daily, in mutual fund schemes of your choice. It is a suitable option if you earn daily wages. 

Which is the right SIP date for your mutual fund?

You do not have any best date when putting money in mutual funds through the systematic investment plan. You may get a slightly higher return if you put money in mutual funds towards the end of the month. However, you may consider investing in mutual funds as soon as you get your salary, which may be at the beginning of the month. 

You may find your SIP in mutual funds automatically cancelled if you fail to make payments for three consecutive months. Your bank could also penalise you for dishonouring your auto-debit payments. 

You may put money in mutual funds at the start of the month through the SIP, instead of chasing a slightly higher return, by investing at the end of the month. You may focus on investing in mutual funds through SIP to achieve your long-term financial goals, rather than paying too much attention to SIP dates. 

It would help if you focused on choosing the right mutual fund depending on your investment objectives and risk tolerance. You may consider not pausing or stopping SIP instalments if you want to attain your financial goals. Many first-time investors in mutual funds pay too much attention to SIP dates. However, it would help if you chose SIP dates based on convenience. In a nutshell, you may focus on the right amount for your SIP instalments based on your investment horizon to attain financial goals. 

For any clarifications/feedback on the topic, please contact the writer at cleyon.dsouza@cleartax.in