Daily SIP versus Monthly SIP

Solved! Monthly SIP gives higher returns than Daily SIP

This question comes to every SIP investor’s consideration – should I opt for a daily SIP or a monthly SIP frequency? In this post, we shall look at this battle from a performance and practicality standpoint. Let the fight begin!

While monthly SIP is the norm, most fund houses offer a daily frequency SIP aswell. This is a marketing ploy of encouraging users to promote the habit of investing a small sum daily

On a lighter note, this must be making the payment gateway companies very happy. Payment gateways charge ₹5 to ₹10 for every transaction irrespective of the amount. SIPs start from as low as ₹100. A high payment gateway cost with low SIP amount hurts the economics of mutual fund companies.

The real question is – do daily SIPs offer a) better returns and b) lower volatility as compared to monthly SIPs?

Logically, investing daily tracks daily price movements and hence should provide a better averaging. One of the more important benefits of SIP is to provide adequate volatility protection through averaging. Returns in the long-run for daily SIP versus monthly SIP is a completely different matter.

Performance Analysis of Daily SIP versus Monthly SIP

I am borrowing a research that was done by PersonalFN. The study was done for a 5-year period starting March 2013 spread across 147 equity-oriented schemes.

Over 5 years, daily SIPs comes to 1,225 daily instalments while monthly SIPs is a much manageable 60 monthly instalments. The PersonalFN research discovered that –

  • Monthly SIPs generated an outperformance of just 0.41% over daily SIPs
  • The average XIRR generated was 18.8% in case of monthly SIPs and 18.7% for daily SIPs

I maintain that an investor should opt for monthly SIP over the daily SIP because –

  1. Managing daily SIP is extremely inconvenient. Imagine having over 1,200 entries in your annual bank account statement for every SIP. And then having to calculate taxes. It’s a mess.
  2. Monthly SIPs offer better tracking and helps you plan better. This coincides with how you receive your income i.e. once a month. Consistency here will help you plan your finances better and control over your financial cashflows.

Additional Resources You Might Like

  1. 5 Steps process on how to start SIP investment online
  2. The best SIP plans to invest in 2020
  3. Top SIPs for long term investing
  4. Complete Investor Guide to Building Wealth with SIP
  5. SIP Calculator