Which is the best date for SIPs?

Let’s accept it, some days are special. While we all dread Mondays, we often look forward to Saturdays and Sundays. Do days or dates also hold any significance while investing in mutual funds through a Systematic Investment Plan (SIP)? Is there really a good date or best date for SIPs? Let’s find out.

SIP dates explained

There are different types of mutual funds such as equity funds, debt funds, and hybrid funds that you can choose from. An SIP allows you to make regular investments in the mutual fund scheme of your choice. When you start an SIP, you must select your SIP amount and date. Say, you start a monthly SIP of Rs 1000 in an equity mutual fund and choose the date as the 24^th. As such, on the 24^th of every month, Rs 1000 will automatically get deducted from your bank account and credited into the bank account of your chosen equity mutual fund scheme. You will then be allotted mutual fund units based on your SIP amount and the applicable Net Asset Value (NAV). 

Now that you understand SIP dates, let’s find out if there is any best date for SIPs.

Finding the best date to start SIPs

Different Asset Management Companies (AMCs) follow different set of rules regarding SIP dates. While some AMCs follow the ‘Any day SIP’ concept, others may have specific dates available. In any case, you have a choice between many dates.

Now, you must be wondering which is the best date for SIPs in your case.

Many investors believe that an SIP on a particular day of the month can be more rewarding in terms of returns. However, this is not true. If you compare the Extended Internal Rate of Return (XIRR) generated by SIPs made on different dates of the month, you will be surprised to know that there is no significant difference. This means that the date of your SIP has little or no impact on your SIP returns. So, that brings us to the next question – What should you consider while deciding on your SIP date?

Things to consider while choosing your SIP date

1. Convenience: This is the most important factor that you must keep in mind while selecting your SIP date. Since the money is auto-debited from your bank account regularly, you must ensure that you have sufficient funds there. If you miss your SIP payments thrice consecutively, your SIP will stand cancelled. Moreover, your bank may charge you a fee for every default. Thus, it is advisable to keep your SIP date close to your salary date or the date when you expect to receive your income.

2. Discipline: Instead of worrying about the dates, your focus should be on continuity. Choose an SIP amount that you can comfortably invest for the long term. You can begin with a small amount and top it up later through step-up SIPs. The biggest advantage of SIPs is rupee cost averaging. This means that sometimes you get more units with low NAVs, and sometimes you get fewer units with high NAVs for the same SIP amount. This process over time helps in averaging your cost of investment. Thus, instead of timing the market, let your money stay for an extended time in the market.

To sum it up

The best date to start SIPs will be the one that aligns well with your income pay dates. Otherwise, there is only a marginal difference between the returns generated by SIPs started on different dates.

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