What Does SIP Day Mean?
Updated on: Jan 13th, 2022
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2 min read
You have a systematic investment plan or SIP where you invest small amounts regularly in a mutual fund. It is one of the best ways of investing in equity funds without timing the stock market.
SIP helps you invest in mutual funds in a disciplined manner. You can start a SIP bank mandate to authorise the third party to debit a fixed sum from your bank account on predetermined days.
What does the day of SIP mean?
You have the SIP order date where your SIP order is due for execution. You may also consider the SIP due date, which could be two days before the SIP order date. It is the day on which the amount payable towards your SIP order becomes due.
The day on which SIP instalments are paid is called SIP day. For example, you put money in a mutual fund through a monthly SIP where your SIP day is 10th every month. You will find money auto-debited from your bank account on SIP day towards your SIP instalments if you have set a SIP bank mandate.
How to choose the SIP day?
You could invest in mutual funds through a daily, weekly, fortnightly or monthly SIP to achieve your financial goals. However, the frequency of SIP doesn’t have much of an impact on your returns.
You can invest in daily SIP or monthly SIP in mutual funds to attain your financial goals. Moreover, you could opt for the monthly SIP if you get a fixed monthly salary. You can choose a date close to payday for convenience.
You will have enough balance in your bank account for the SIP transaction to go through. However, the AMC will automatically cancel your SIP if you don’t make payments for three consecutive months. The bank could also levy a penalty. You may opt for daily SIP if you earn daily wages.
You don’t gain any significant advantage by choosing a SIP date. You can select a date close to your salary day for convenience. The SIP date selection is irrelevant if you are investing in mutual funds through SIP for the long term. However, you may avoid opting for weekly SIP as you will struggle to monitor your investment.
You must concentrate on picking the right mutual fund based on your investment objectives and risk tolerance. It helps you shift focus from SIP dates and SIP frequency if you are a long-term investor in equity funds.
Why doesn’t SIP Day matter?
- Suppose you invest in equity mutual funds through SIP. You cannot predict stock market movements in the short term. You can choose any SIP date based on your situation.
- Let us assume that stock prices are more volatile on some dates of the month. You are protected from stock market volatility through rupee cost averaging, which averages out the purchase cost of your investment over some time if you invest through SIP.
- You must not skip SIP dates in both bull and bear markets if you want to attain your financial goals.
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How to choose SIP Dates for Mutual Funds?
Quick Summary
Systematic Investment Plan (SIP) allows disciplined investing in mutual funds regularly. Choosing an SIP day matters depending on payment frequency. Diversify your SIP investments for long-term goals to counter short-term market fluctuations. Avoid skipping SIP payments for financial success.
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