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 date every month, for a tenure that you choose. One concern that investors, however, have is what is the best date for SIP investment commencement? Let’s understand how you can determine the right date for your SIP. 

This article covers: 

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?

Let’s analyse. 

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 and 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 done 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 this auto-debit mandate, your bank account needs to have sufficient funds for the transaction to be successfully completed. So, if the inflow of funds into your account follows a particular pattern, like the beginning of the month for salaried individuals, 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 may want to 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 spends. Once this is done, you may be able to set aside funds for investment. Choose a date after you have either met your regular expenses or after you have made sufficient provisions for them.

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. You should, therefore, choose the SIP date after taking into consideration 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.

Happy investing!

5 Comments

  1. Er A Rahman Reply

    Very disappointing, I was expecting to hear some knowledgeable thoughts and advises about suitable market conditions of entry.

    • Aradhana Gotur Reply

      Hello! The objective of an SIP is to allow an easy and affordable mode of investing in mutual funds, without having to worry about garnering a lump sum. That said, there is no suitable entry time as such. The volatility exposed to all your investments via SIP are ironed out in the long run. Hope this answers your question.

  2. What is so great in this article ? Misleading title, as if it is going to talk about some real process

  3. Absolutely 0 value addition in this article. Was expecting some results backed by data and not just GK

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