Daily SIP

What is a Daily SIP?

A Daily Systematic Investment Plan (SIP) is a method of investing in mutual funds or market-linked funds where you invest a fixed amount of money every day. This is different from traditional SIPs, which involve investing a fixed amount monthly or quarterly. Daily SIPs offer more flexibility and can be a great way to start investing with smaller amounts. By investing consistently, you can benefit from rupee cost averaging, which helps reduce the impact of market volatility over the long term.

How Does Daily SIP Work?

Daily SIPs work by automatically deducting a small amount from your bank account every day. This amount is then invested in a chosen mutual fund or market-linked fund scheme. The key advantage of this approach is that it allows you to invest regularly, even if you have limited funds available.

Here’s how daily SIP works:

• Choose a market-linked fund: You select a fund scheme that aligns with your investment goals and risk tolerance.

• Set a daily investment amount: You decide how much you want to invest each day.

• Authorize bank mandate: You provide your bank details and authorize a recurring mandate for daily deductions.

• Daily investment: On each trading day, the specified amount is deducted from your account and invested in the chosen market-linked fund.

• Accumulation of units: Over time, you accumulate units of the fund, and your investment grows based on the fund's performance.

What are the Benefits of Daily SIP? 

Below are the benefits of daily SIP:

• Rupee Cost Averaging: This strategy helps mitigate the impact of market volatility. You buy more units when the NAV (Net Asset Value) is low and fewer units when the NAV is high, potentially reducing the average cost of your investment over time.

• Discipline: Daily SIPs create a disciplined approach to investing by encouraging regular contributions, regardless of market conditions.

• Accessibility: With small daily investments, Daily SIPs are accessible to investors with limited funds, making it easier to start investing.

• Flexibility: You can pause or stop the investment at any time, providing flexibility in your financial planning.

• Convenience: Daily SIPs are automated, making it easy to invest without the need for constant monitoring.

• Potential for Long-Term Growth: Consistent investing over a long period can help you accumulate wealth and benefit from the power of compounding.

Factors to Consider Before Starting Daily SIP

Below are the points to consider before starting daily SIP:

1. Investment Goals:

   • Short-term or long-term: Determine whether you're investing for short-term goals like buying a house or long-term objectives like retirement.

   • Risk tolerance: Determine your comfort level with market fluctuations to choose appropriate fund types.

2. Financial Situation:

   • Emergency fund: Ensure you have an adequate emergency fund to cover unexpected expenses before starting SIPs.

   • Debt: If you have high-interest debt, consider paying it off first before investing.

   • Income: Evaluate your income and expenses to determine how much you can allocate to investments.

3. Lock-in Period:

   • Exit load: Some funds have exit loads, which are penalties for withdrawing your investment before a certain period. Consider the lock-in period before investing.

4. Tax Implications:

   • Tax benefits: Understand the tax implications of investing in market-linked funds. Some funds offer tax benefits under specific tax regimes.

5. Market Volatility:

   • Risk tolerance: Be prepared for market fluctuations and avoid making impulsive decisions based on short-term price movements.

   • Long-term perspective: Focus on the long-term benefits of investing and stay patient during market downturns.

6. Review and Rebalance:

   • Regular review: Periodically review your investments to ensure they align with your goals and risk tolerance.

   • Rebalancing: Rebalance your portfolio to maintain your desired asset allocation as market conditions change.

How to Start a Daily SIP?

• Choose a Platform: Select a reliable online investment platform or consult with a financial advisor.

• Select Funds: Research and choose a mutual fund or market-linked fund that aligns with your investment goals and risk tolerance.

• Set Up Automatic Contributions: Authorize your bank to deduct a fixed amount daily from your account.

• Monitor and Review: Regularly track your investment performance and make adjustments as needed.

Daily SIP Calculator

A Daily SIP Calculator is a financial tool that helps you estimate the potential returns on your Systematic Investment Plan (SIP) investments. By inputting details like the daily investment amount, expected annual return, and investment tenure, the calculator projects your future corpus. This tool empowers you to make informed investment decisions and visualize the power of consistent, disciplined investing over time. It's a valuable resource for anyone looking to grow their wealth steadily and systematically.

Daily SIP vs Monthly SIP

A Daily SIP involves investing a fixed amount every business day. A Monthly SIP involves investing a fixed sum in a fund scheme once a month. Below is a comprehensive comparison between daily SIP vs monthly SIP:

Conclusion

Daily SIPs can be an effective strategy for investors looking to minimize risk by consistently investing in the market, regardless of its short-term movements. It encourages disciplined saving while potentially lowering the overall purchase cost of fund units. However, the higher transaction frequency may come with additional costs, and it requires greater dedication to maintain daily contributions. For those who prefer smaller, more manageable investments and wish to capitalize on market fluctuations, daily SIPs can offer an efficient way to build wealth steadily over time.