Which is the best day of the month to invest in an SIP?

Which date should I choose for my SIP?

If you’ve ever wondered, "Which date should I choose for my SIP?" you're not alone. It's a common question for many when they first embark on their investment journey through Systematic Investment Plans (SIPs). The idea that picking the perfect date can somehow give you an edge in the market is tempting, but is it really necessary?

SIPs attract investors

SIPs are popular for a reason—they allow investors to stagger their investments over time. This "invest as you earn" approach is convenient and helps reduce the risk associated with trying to time the market. By investing regularly, you benefit from rupee-cost averaging, where your fixed investments buy more units when prices are low and fewer units when prices are high, ultimately smoothing out the cost over time.

It’s no wonder the amount of money flowing into SIPs has been on the rise. For instance, in July 2024 alone, investors poured in Rs 23,332 crore through SIPs in mutual funds, a significant increase from Rs 12,286 crore in July 2022.

Despite this growing interest, some people still hesitate to start an SIP. Others remain underinvested or waste time trying to time the market. But here's the truth: the date you choose for your SIP doesn’t really matter.

The Myth of the “Best” SIP Date

A recent SIP Analysis Report by Whiteoak Capital Mutual Fund sheds light on this very topic. The study analyzed SIPs on the BSE Sensex over a span of 26 years, concluding that there’s no significant difference in returns based on the SIP date chosen. Whether you invest on the 1st, 15th, or 28th of the month, the results are nearly identical.

Over the long term, Sensex SIPs have generated an average return of 14.1 percent annually, regardless of the frequency or specific date of investment. Monthly SIPs, in particular, showed returns close to 15.7 percent, whether the investment was made at the beginning, middle, or end of the month.

The fund house analysed the data pertaining to SIPs on the BSE Sensex over the 26 years ended March 31, 2023, to reach these conclusions.

The graphic makes it clear that over a long period, Sensex SIPs have generated 14.1 percent returns (on a compounded annualised growth basis) irrespective of their frequency. In the case of monthly SIPs, the returns stood close to 15.7 percent for dates ranging from the 1st to the 28th of each month.

The Key to SIP Success: Discipline

The appeal of earning 14 to 15 percent returns makes SIPs an attractive option for wealth creation. But there are important lessons for investors to remember.

Market volatility can be unsettling, especially when it temporarily turns SIP returns negative. During these times, it’s crucial not to panic and abandon your investments. Instead, focus on creating a realistic, goal-based plan and stick to it. For example, if you’re aiming to build a corpus of Rs 1 crore for your child’s higher education, starting an equity SIP of Rs 20,000 per month for 15 years could help you reach your goal, assuming a 12 percent return.

While the historical analysis suggests a potential return of around 15 percent, it’s wise to moderate expectations to about 12 percent, considering today’s lower interest rate environment.

What Should You Do?

The first step toward wealth creation is to start and continue your SIP. As your income and aspirations grow, so should your investments. Consider topping up your SIPs regularly to reach your goals faster.

In addition, take advantage of market downturns by doubling your SIP contributions when prices are lower. This strategy can accelerate your wealth-building journey, as long as you remain consistent.

Remember, SIPs don’t guarantee returns, but over the long term, the markets are expected to grow, which should reward patient SIP investors. The most critical factor you can control is the consistency and discipline with which you invest in equity mutual funds.

So, which day is the best to invest in an SIP? The answer is simple—any day. The key is to start, stay committed, and keep your eyes on the long-term prize.

Have you started your SIP?

Warm regards,

Tejas Lakhani

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