You have always wanted to save a certain amount of money each month form your income but it has become impossible to do so. Investments seem like an option but even then, you would need some amount to invest. Investing regularly is what you need to become a disciplined investor. SIP or Systematic Investment Plan is one way to invest in mutual funds. As you would know already, SIP is the mode to invest in mutual funds wherein a specific amount is deducted from your account at a specific period. You can open SIP online and link your bank account.
Here we help you decide which period for SIP is better, monthly or weekly.
In a weekly SIP, the amount you want to invest is deducted from your account every week for a specified time. Let us understand this with an example. You want to invest Rs 500 every week for a period of 5 years in a mutual fund scheme. The total SIP investment is Rs 1, 30,000. With an expected annual return of 7%, the amount at the end of your tenure will be Rs 1,55,739.
When you choose for a monthly SIP, the amount is deducted from your account each month. For e.g., you want to invest Rs 2,000 every month for a duration of 5 years in a mutual funds scheme with an expected return of 7%. The total amount invested is Rs 1, 20,000. The amount accumulated at the end of the tenure is Rs 1,44,022.
Weekly SIP vs Monthly SIP
When you focus on the numbers above and compare them, you will see that there is not a huge difference in the amount accumulated from the Weekly SIP than a monthly SIP. Also, the above calculation is done by keeping in mind only a single time period. When there are different periods involved the results can still be similar.
Advantages of a Weekly SIP
- Weekly SIPs help investors to reduce the risk from market timing. As you invest weekly, which is more frequent, the risk to invest at the wrong time is reduced.
- You can average the purchase cost and maximize profits. As you invest frequently over a short period, you tend to accumulate a high number of units when the market is low and vice versa.
Disadvantages of a Weekly SIP
- It gets difficult to track and manage the cash flow, as you have to invest every week and need to have enough money for it.
- Short-term fluctuation might distract you from your goal.
Advantages of Monthly SIP
- If you are a salaried professional then monthly SIP suits you best as you receive your salary at the end of each month. You also make your budget at the end of the month, hence having your investments at the end of the month is better.
- You can avoid getting distracted by the short-term fluctuations.
There is no disadvantage to a monthly SIP. If it is a weekly or fortnightly SIP, then there is increased paperwork and you need to keep a constant record. A monthly SIP will not require you to monitor it constantly. It makes your investment process simpler. You can use a SIP calculator to get an estimate of your returns.
“Mutual Fund investments are subject to market risks, read all scheme related documents carefully.”