By now, we’re confident that you know what a systematic investment plan, or SIP, is. SIPs have received a lot of attention from investors in mutual funds. Not without cause, they have been hailed as the greatest option to invest in mutual funds. SIPs have several advantages, from the psychological advantages of developing a habit of saving and investing to the practical benefits of averaging your acquisition costs.

A systematic investment plan essentially makes investing in mutual funds simpler for you. You don’t need to be concerned about where or when to invest. You’re good to go after you establish a SIP in a mutual fund that performs well. While a SIP is a straightforward investment strategy, it can become complex if you start to ponder the various SIP periods.

Which SIP is better? Monthly or Yearly?

Although monthly SIPs are the most common, investors can choose to invest via SIPs at a frequency that suits them best by investing monthly, weekly, or even daily.

To receive better returns on your investment, is it a good idea to raise the frequency of SIP to weekly and even regularly? SIPs assist a person in investing in stock funds at various market levels, which aids in averaging the cost of the investment. It is a common belief that increasing the frequency of SIP will enable investors to capture greater market volatility than they would do with monthly investment alone.

Nevertheless, SIP is inappropriate for some debt funds. On the other hand, lump-sum investments are a one-time, sizable investment in a particular plan. Also varying is the minimum investment amount. While lump-sum investments normally require at least Rs. 1,000.

SIPs could be started with as little as Rs. 500 per month. SIP is a challenging question with no simple solution. However, if we concentrate on a few monthly and yearly investment elements, we might conclude that a SIP is more effective than an annual lump-sum investment. The benefits of SIP over annual lump-sum investments are numerous.

Tax Advantage

This is due to the requirement to report capital gains on tax returns at the time of redemption. Then, you must declare capital gains for each purchase you make daily. In that regard, monthly SIPs are much simpler to administer. The difficulty of a daily SIP is only increased when tax filing.

There is no evidence, regardless of what the historical data indicates, that a daily SIP will perform better than a monthly one in the future. Therefore, it is preferable to choose your SIP frequency depending on your convenience and your investing time horizon (if it is longer than a few years, you should choose monthly SIPs).

A more regular SIP offers nothing to improve long-term results and merely adds needless complexity to this process. Whether you do a monthly, daily, or weekly SIP has little effect on your results if you are investing for the long run.

However, it is entirely up to you if you want a SIP that is more detailed than a monthly one. Decide to carry it out. Additionally, those who struggle to handle monthly SIP due to irregular cashflows, such as those with erratic business income, might choose to enrol in a quarterly SIP rather than a monthly one.

Bottom Line

Don’t review your investments too frequently. You will examine your money too often if you have a weekly or biweekly systematic investing strategy. A monthly systematic investment plan will help you avoid being affected by short-term ups and downs that might alter your investment choices.

A quarterly systematic investing strategy will cause your money to sit in your bank account for an excessive amount of time. This might be a missed chance, or it might be wasted.

The paperwork generated by a weekly or biweekly systematic investment plan will be excessive, and there will be a greater requirement to update and monitor transactions. A disciplined monthly investment plan can prevent this.