In recent times, systematic investment plans (SIP) have gained immense popularity among investors looking to secure their financial future in a disciplined manner. You can invest your money gradually and regularly with SIPs, which is a wise strategy for enjoying the benefits of compounding and increasing returns over the long term.
As an investor, you want to earn the highest return on your capital. Naturally, you might want to understand when to invest in SIPs or if such a strategy exists at all. Does timing your investment have an impact on your returns? Let us look into this.
In 2022-23, inflows in SIPs reached Rs. 1.56 lakh crore, a 25% rise from the previous fiscal year. There are over 6.4 crore SIP accounts today in the Indian mutual fund market. If we look at historical data, it is clear that investment in SIPs has consistently increased over the years. The popularity of SIPs also has to do with the fact that an instalment can be as small as INR 100 each month.
Before we look at the ideal SIP date to maximise your investments, let’s understand the options available to investors. There are two main ways to invest in mutual funds:
1. SIPs (systematic investment plans)
2. Lumpsum investments
It is important to choose the right approach that aligns with your goals.
| Factors | Lumpsum | SIP |
| Why choose? | Lumpsum investments are ideal for investors who consistently track the market and can identify the right time to enter it with their corpus. This is because a lumpsum investment is likely to earn higher returns (if timed properly) than SIP investments which tend to earn an average return over the long term. | SIPs are lower-risk investments since they require investing smaller amounts over a period of time. SIPs also offer a lower barrier to entry to novice or first-time investors since they don’t need to track or time the market as such. Investing smaller amounts at regular intervals reduces the adverse impact of market fluctuations and minimizes the risk of significant losses. |
| Returns | Higher absolute returns. | Average returns over the long run. |
| Market timing | Requires accurate timing for maximum returns. | Reduces the need for market timing. |
| Investment capital | Requires a larger initial investment. | Requires smaller amounts at fixed intervals. |
| Market fluctuations | More susceptible to market fluctuations. | Less affected by market fluctuations. |
| Accessibility | Suitable for investors with significant wealth or market knowledge. | Easier for new investors to start. |
| Ease of investment | Requires active management. | Investors can set up automatic investments without much active management. |
When choosing the best SIP date for mutual fund investment, there is no one right answer. Investors have different strategies based on their goals and financial condition.
To put it simply, there is no such thing as a ‘best’ date for SIP investments. Some prefer investing at the start of the month, while others favour the end-of-month approach. However, there is no significant difference or discernible advantage in the returns with variability in the date of investment.
Therefore, investors need not worry excessively about the timing of their SIPs. To pick one, you can take your convenience and financial condition into account. For instance, salaried individuals who receive their pay in the first week of a month can plan their SIP transfers for the following week.
It is, however, essential to focus on maintaining discipline and consistency in your SIP investments. If you want to start your investment journey, a SIP calculator is the right place to begin.
An SIP return calculator estimates expected returns for monthly SIP investments, by considering various parameters such as investment amount, investment period, expected rate of return, and the number of payments to calculate the potential future value of the investment. By using this calculator, you can make informed decisions, and plan your investments effectively.
The SIP return calculator is a useful tool that provides an estimate of the returns you can expect after your investment period.
The formula used to calculate returns is-
M = P × ({[1 + i] n – 1} / i) × (1 + i)
Where-
M: the amount you get on maturity
P: the amount you invest at regular intervals
n: the number of payments you’ve made
i: rate of interest you earn
1. Select your desired option: SIP (systematic investment plan) or lumpsum.
2. Enter your investment value.
3. Choose the expected returns.
4. Enter the tenure.
5. The calculator will show you the estimated amount you can get after your investment period is complete.
SIPs offer a powerful way to build wealth in an organized manner. Investors only need to put away small amounts periodically to build a substantial corpus over time. The important thing is to be disciplined with this approach and stay invested for the long run.
Instead of getting caught up in the quest for the best date for starting your SIP journey, focus on selecting a date that aligns with your personal comfort and financial situation. What truly matters is consistency in your investments and maintaining a long-term perspective. So, set aside worries about finding the ‘best’ or ‘worst’ date and prioritize regularity and a stable approach to achieving your investment goals.
Compare your investment options, use tools like an online SIP return calculator, and leverage the power of SIPs to start building your wealth.
If you are considering investing in mutual funds and haven't initiated your SIP yet, begin with Tata Capital Moneyfy. We bring you a reliable platform for managing your investments and starting your SIP journey with confidence. Start multiplying your money with Tata Capital Moneyfy’s all-in-one investment platform and embark on a path of financial stability!
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05 December 2023
5 mins read
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