Last Updated on Apr 20, 2023 by
Systematic Investment Plans (SIPs) are a popular way to invest in mutual fund schemes. They give you the benefit of – affordable investments, Rupee-cost averaging, the freedom from timing the market, and a disciplined approach to investment. When you choose the SIP route, a fixed amount of money is invested periodically, usually on a fixed monthly date, for the tenure you choose. One question investors have is, what is the best date for SIP investment commencement? In this article, let’s understand how you can determine the right date for your SIP.
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Choosing the date which is right for you
Theoretically, the best date for SIP is one that allows you to have the money to make the investment and gives you the maximum returns on your investment. But when it comes to choosing the best date for SIP, it ultimately boils down to one central theme – YOU.
Yes, you read it right!
You should assess the best date based on your suitability. And this suitability depends on the following factors:
- When does your bank account have sufficient funds for SIP transfers?
- When can you put aside your disposable income for investment?
- What if you have multiple SIPs?
Factor 1 – Sufficient funds in your bank account
For most salaried investors, their salary gets credited to their bank account usually in the first week of every month. For independent contractors, the payment cycles might differ.
Similarly, for the self-employed, the first week of the month does not guarantee an inflow of revenues, so they might prefer the mid-week or even the last week of the month for SIP investments.
In the case of SIPs, the investment is usually made through an auto-debit mandate from your bank account. This means that you place an instruction in your bank account to pay the SIP on a particular date of every month without seeking regular explicit permissions from you. To fulfil the auto-debit instruction, your bank account needs to have sufficient funds for the transaction to be successfully completed. So, suppose the inflow of funds into your account follows a particular pattern, like the beginning of the month for salaried individuals. In that case, matching the SIP date to this pattern may be comfortable.
Simply put, your SIP date should, ideally, fall after the date on which you get funds into your bank account, even more so if you maintain a minimum balance in your account. Insufficiency of funds would pause your investment, meaning you lose out on the regularity of savings which in turn would affect the returns in the long term.
On the other hand, if you maintain sufficient funds in your bank account and you don’t need to depend on the inflow of funds, you can choose any date for investment.
Factor 2 – Setting aside disposable income
Another thing to consider is the availability of disposable income. Every month, after you get your salary or your business generates income, you should prioritise your monthly expenses over your investments. These are generally the necessities such as grocery, rent, utility charges, EMI, and fuel costs, and not discretionary spending. Once this is done, you may be able to set aside funds for investment. Choose a date after you have met your regular expenses or made sufficient provisions for them.
Factor 3 – Multiple SIPs
If you hold multiple SIPs, you can spread your investments across the month. Choose a date for each SIP. Make sure you have sufficient funds in your bank account and follow the right investment strategy.
What should you do?
Mutual funds do not dictate any particular date for SIP investments. The choice of the best date for SIP is at your discretion. That said, every investor is different, and so is their financial position. In order to understand better, pick your favourite SIP and compare the XIRR (Extended Internal Rate of Return) of each date. There may not be a drastic change in the fund’s returns each day. Also, it is important to note that different funds belong to different categories, so not all the funds will have the same date as the ‘best date’ to invest in.
The primary idea of a SIP investment is not to time the market. All you need to ensure is you don’t skip investing regularly. Therefore, choose the SIP date after considering your suitability. Your bank account should have sufficient funds, and your financial obligations should be taken care of when you are investing in SIPs. So, choose a date wherein both these parameters are taken into account.
The final word
Just like you assess different mutual fund schemes to choose the one that suits you, assess your financial position when fixing the SIP date. When you choose a date that suits your financial strategy, you can watch your investments grow in a disciplined manner without affecting your monthly budget. Also, avoid copying what your friend, colleague, or relative is doing. The best SIP date for them might not be the best SIP date for you. Take note of your personal financial situation before finalising the SIP date.
Use Tickertape Mutual Fund Screener to find the right SIP for your investment objective and risk profile. There are over 50 filters available to help pick the right one to fulfil your goals. Happy investing!
What is the best SIP date for a mutual fund?
There is no best date to invest in SIP mutual funds. All you have to do is to ensure that you pick the right SIP that suits your investment goals and risk profile and have funds available in your bank account for auto-debit.
How to change the SIP date?
You can visit your Asset Management Company’s (AMC) website or talk to their executives and get your SIP date changed.
Are there any penalties levied on skipping SIP investment?
The AMCs don’t charge any fee when you skip a SIP payment. They prompt the bank for auto-debit, and due to insufficient funds, the transaction may fail. In such cases, the bank may impose a penalty for not maintaining sufficient funds in the account. And if you miss three consecutive SIP payments, the SIP will get cancelled automatically.