Comparing SIP Returns: Monthly vs. Daily vs. Quarterly SIPs

/ M. Pattabiraman / @pattufreefincal / 13 Comments

Published: June 24, 2013 at 6:00 am

Last Updated on September 19, 2019

How would you answer if someone asks you: “I know that a systematic investment plan (SIP) in a mutual fund is an effective way to accomplish financial goals, but how often should I invest? Each month? Each quarter? Or should I invest daily? Which option provides better returns?”

There are two ways of answering this: Without a calculator and with a calculator. Let us consider both.

 1. The PERSONAL finance way: I don’t care which option is better. I receive a monthly salary. I take out money for expenses after I invest for my goals. So for me it is convenient if the frequency of investment matches the frequency of cash inflow. If I didn’t have regular monthly income I will probably choose a quarterly SIP.

Since I do have regular monthly income I could choose a daily SIP. However I choose not to. I am investing for long term goals in mutual funds with a good track record. Each year there are about 250 trading days. If I do a daily SIP for 5 years, how many entries will my account statement have? This makes monitoring the investment and redemptions pretty cumbersome.

By the same argument investing in a quarterly SIP will give me a much shorter account statement making it easy to monitor and process. However I do not like the idea of my investable income sitting idle for two months. I will have to worry about my bank balance and make sure I don’t spend this money. Getting ‘rid’ of this money as soon as possible is best way to ensure financial peace.

The notion of monthly and quarterly SIP options is understandable. Salaried individuals usually opt for monthly SIP and business men or those who get paid now and then could opt for a quarterly SIP.

Why on Earth is there a bizarre option like a daily SIP open for the retail investor? Beats me. There are circumstances when for the same amount of total investment, investing daily could get me more units and therefore (usually!) more returns than investing each month or each quarter. If a fund is highly volatile (that is its NAV fluctuates up and down wildly), investing daily exposes me to more low NAV days then other options. In such cases a daily SIP could result in higher units and therefore higher returns than a monthly or quarterly SIP. By the same argument a monthly SIP could do better than a quarterly SIP.

The crucial question is will the difference in returns make a significant difference to the corpus I will accumulate. Unless I calculate I won’t know. I don’t care though. I don’t intend to loose sleep over this. I invest in a way best suited for me, period.

To me this question (which is the best? Daily/monthly/quarterly?) is mere hairsplitting.

2. The personal FINANCE way: If the ‘I do what is best suited for me’ argument is not convincing, the only way out is math – the best way to win most arguments (especially hairsplitting ones). Here is a calculator that can compare returns from daily, monthly and quarterly SIPs using NAV history of any mutual fund. You can compare results for any investment period for which NAV data is available.

Three versions of the calculator are available:

  • One with NAV history of Franklin India Blue Chip fund from Jan. (7th) 1994 to Jun. (4th) 2013. A fund with a consistent terrific record.
  • One with NAV history of Quantum Long Term Equity from Mar. (20th) 2006 to Jun. (6th) 2013. A fund which has performed remarkably well in a choppy market.
  • One with no NAV entries. You can enter NAV history of any mutual fund to

1. compare daily, monthly and quarterly SIP returns
2. calculate returns of your ongoing SIPs

NAV history from fund inception will have to be obtained from the AMC’s website. NAV history from Jan. 2000 for all mutual funds in excel format can be obtained here: Personalfn Nav History

The blank sheet can be modified by someone interested in different ways:

  • you could generate a SIP account by using some clever Excel features
  • you could integrate this with the Excel MF tracker to integrate past and future SIP records
  • NAV history allows you to do a whole lot of analysis on MF risk and return (coming soon!)

Results: Here are few snapshots from the calculator. Please draw your own conclusions. Use the calculator for further analysis. As far as I am concerned: I receive my salary each month and therefore invest each month, period.

Download Monthly vs. Daily vs. Quarterly SIP Calculators (Franklin India Blue Chip)

sip-res2

 

Download Monthly vs. Daily vs. Quarterly SIP Calculators (Quantum Long Term Equity)

Download Monthly vs. Daily vs. Quarterly SIP Calculators (enter NAV history of any mutual fund)

Credits: Prasnath wanted to know if I had compared daily vs. monthly SIP returns. Though I am not interested in the answer the only reason I made this calculator is because of the challenge involved in ensuring the transaction dates for monthly and quarterly SIPs are taken into account correctly. Thanks to Prasanth’s question I had a good time figuring out how to do this in Excel.

Source:

Franklin India Blue Chip NAV history

Quantum Long Term Equity NAV History

Related articles
Do share if you found this useful
How to profit from content writing: is our new ebook for those interested in getting side income via content writing. It is at available at a 50% discount for Rs. 500 only!
Did you know? We have more than 900+ videos on YouTube to explore! Join our YouTube Community!
Use our Robo-advisory Excel Template for a start-to-finish financial plan!

Join our courses in exclusive Facebook Groups!

  • 520+ members are now part of our new course: How to get people to pay for your skills! (watch 1st lecture for free). Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show how to achieve by showcasing your skills and building a community that trusts you and pays you!
  • Goal-based portfolio management! Join 2125+ members and get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment of Rs. 3000 only. No recurring fees! Life-long access to videos (10+ hours content)  in an exclusive Facebook Group! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!) or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps