Daily, Weekly Or Monthly – Which SIP Frequency Gives Maximum Returns?

Many of you must have heard the phrase “the more, the merrier,” right? But does that apply to investments as well, especially mutual fund SIPs, which have been becoming increasingly popular in recent years?

What if you invested more frequently in SIPs, instead of the usually common monthly route? Like a weekly or in fact daily investment in SIPs vs the monthly ones? Would the higher frequency give you better returns? Well, let’s find out!

Jump To

Comparing Daily, Weekly, Monthly SIPs

shutterstock

To give you a fair understanding of the returns that different SIP investment frequencies provide, let’s take the following example. 

Let’s assume that you are planning to invest Rs 5,000 per month (which amounts to Rs 1250 per week and Rs 166 per day) into equity mutual funds through SIPs for a period of 5 years (assuming a conservative rate of return of 12% p.a.). We have used this SIP calculator tool for arriving at returns for different SIP frequencies of investment. 

Monthly

Rs 5000 invested per month for 5 years (Rs 3 lakh total investment)

Corpus created= Rs 4,12,431

Weekly

Rs 1250 invested per week for 5 years (Rs 3 lakh total investment)

Corpus created= Rs 4,45,658

Daily

Rs 166 invested per day for 5 years (Rs 3 lakh total investment)

Corpus created= Rs 4,15,147

So, the calculation points towards weekly SIPs fetching relatively higher returns than the other two frequencies. But before you hop onto the decision to start or switch to weekly SIPs, just pause and read this too.

Also Read: Benefits Of Investing In Mutual Fund Through SiPs

Complications Of Doing Weekly Or Daily SIPs

shutterstock

Doing daily or weekly SIPs has its own set of complications. Firstly, many mutual fund platforms and mutual fund houses have the popular monthly SIPs option only, instead of having other frequencies such as daily or weekly as well. 

That means if you want to opt for daily or weekly SIPs, you might have to do extra efforts to find how and from where you can invest in mutual funds through weekly or daily SIPs.

Secondly, your recordkeeping responsibilities will go up if you invest more frequently. With monthly SIPs, you will have 12 entries per year per fund if you only buy and do not redeem. But with higher frequency like weekly SIPs, you will have 52 entries per year per fund.

Thirdly, even taxation becomes tricky when you do daily or weekly SIPs. Each SIP is a fresh investment and has to be accounted for separately. So, daily/weekly SIPs can multiply your workload significantly, without compensating you appropriately. Of course, the fund house may provide you with a ready statement but reading or going through those multiple PDFs of multiple pages would in itself be tedious, right?

So, just for the sake of slightly higher returns, don’t blindly jump onto the decision to go for weekly SIPs, as you may end up seeing the decision do more harm than good. 

Also, there’s another secret about mutual fund SIPs that not many are aware of. It is the step-up SIP that can help you fetch a higher corpus!

How Step-Up SIPs Can Give You A Bigger Corpus

shutterstock

Also Read: How Much Time & Money It Takes To Become A Crorepati Through Mutual Fund SIPs

Now let’s take an example to help you understand the corpus you would create through regular SIPs (assuming monthly ones) vs. step-up SIPs.

Suppose you begin a SIP in equity mutual funds of Rs 5,000 per month for 3 years, 5 years, or 10 years. Assuming a conservative rate of return of 12% p.a., here’s how much corpus you are expected to accumulate through regular SIP.  

In 3 years, you would accumulate a corpus of Rs 2.15 lakh.

In 5 years, you would accumulate a corpus of Rs 4.08 lakh.

In 10 years, you would accumulate a corpus of Rs 11.5 lakh.

Now, if you do a similar investment of Rs 5,000 per month but with a step-up SIP of say Rs 500 every year, here’s how much you could accumulate.

In 3 years, you would accumulate a corpus of Rs 2.37 lakh (which is 9% increase in corpus amount through top up vs without sip)

In 5 years, you would accumulate a corpus of Rs 4.85 lakh (which is 17%  increase in corpus amount through top up vs without sip)

In 10 years, you would accumulate a corpus of Rs 15.7 lakh (which is 36% increase in corpus amount through top up vs without sip)

So, by topping up your SIP by just Rs 500 per year by opting for step up SIPs, you would be able to accumulate about Rs 22,000 more for 3 years tenure, Rs 77,000 for 5 years tenure and a mammoth Rs 4.2 lakh for 10 years tenure.

Also, if you are curious about how SIPs compare with lump-sum investments and which route to choose for bigger corpus creation, click here.

For the latest and more interesting financial news, keep reading universo virtual Worth. Click here.