Imagine if you believed that your morning jog would be more beneficial only if you laced up exactly at 8 am or your daily meals should be consumed at the 1st or the 10th minute of each hour. Comical, isn’t it? And yet, there are folks who genuinely wonder about the best date to start a SIP in mutual funds.
Let me quash the suspense right here – there isn’t one. That’s right, just like the best time to eat your meals is when you’re hungry, the best time to start your SIP is NOW!
Think about it. When you are investing in a SIP, you’re essentially aiming to beat market volatility by averaging out your cost of purchase over time. This method works regardless of the date you choose to invest each month. Just as regular meals nourish your body regardless of whether they are consumed at 6:01 pm or 6:10 pm, SIPs nourish your portfolio through consistent investment.
The beauty of SIPs lies in their power of consistency. It is like getting on a fitness journey – what matters isn’t the time you hit the gym, but rather that you hit it regularly. In the investment world, this is often phrased as “Time in the market, is more important than timing the market.”
Let us come back to the SIP topic. Consider this – let’s say we have two investors, Ram and Shyam. Both have been investing Rs. 1,000 every month in the same mutual fund for 10 years. We will use real Nifty 50 index NAVs on each day of the month from 2010 to 2019. The only difference is, Ram started his SIP on the 5th of each month, while Shyam opted for the 15th. At the end of the decade, you’d find that their corpus is nearly similar, with minimal differences in XIRR. Let’s see the actual values in the two tables below.
The XIRR is 11.63% when SIP is on the 1st of every month.
Now let’s compare this with Shyam’s SIP which occurs on 15th of each month in Nifty 50.
Here the XIRR is 11.59% which is almost the same. Even the corpus is only Rs 500 lesser after 10 long years, a difference less than half a percentage. Compare this with investing in an insurance linked investment product; the difference will be in lakhs.
Does this apply only for 1st and 15th day? Why dont we check all the days of a month. I actually did this exercise obviously excluding 29, 30 and 31st because not all months in the calendar have these days. The XIRR comparison show that the difference us “Unnees-Bees” as they colloquially say in Hindi (ie negligible). See the chart below.
The corpus also after 10 long years of investing comes out in this manner when the SIP is done on different days of the month.
So, just as it is impractical to time your meals or workouts to the exact minute for maximum impact, it’s unnecessary to fixate on the perfect date to start a SIP. Your focus should instead be on maintaining consistency in your investment journey.
I’ll leave you with this – rather than worrying about the best day to start a SIP, ponder about the best day to start investing. And in case you’re still wondering, that day was yesterday. The next best day? Today!
With Jama Wealth, you can start investing right away and reap the benefits of systematic investing, whether in direct equity, in direct plan mutual funds or in any other asset. We believe in nurturing your financial health just as you would your physical health – with regularity, diligence, and a pinch of fun!
