SIP installments (Systematic Investment Plan) is an efficient way of investing in mutual funds that has made investing in mutual funds a much easy and simple process. It helps investors inculcate a habit of regular saving and investing.
SIP, we all know, is the mode to invest in mutual funds wherein a specific amount is deducted from your linked account at a specific period. It can be in many forms like weekly SIP, monthly SIP, fortnightly SIP, and yearly. Well among all people often confuse between two, monthly SIP and weekly SIP. Although every form of SIP follows the same principle that is Rupee Cost Averaging, still investors get confused between monthly SIP and weekly SIP.
Well, let us know about both weekly and monthly SIP Installments, the difference between both, and what is better between the two.
When investors opt for a monthly SIP, the amount is deducted from their registered bank account on a specific date (selected by the investors) each month. For example: if any investors want to invest Rs 2,000 every month for a duration of 5 years then he chooses a specific date for the deduction of SIP installment per month while filling his mutual fund investment application, in a mutual funds scheme with an expected return of 10%. The amount is automatically deducted on the required date. His total amount invested in five years is Rs 1,20,000. The amount accumulated at the end of the tenure will be around Rs 1,56,165 (as per the SIP calculator, it is an expected return and not an actual return).
When investors choose for a weekly SIP Installments, the amount is deducted from their registered bank account on a specific date (selected by the investors) each week that is four times a month. For example: if any investors want to invest Rs 500 every week for a duration of 5 years then he chooses a specific date for the deduction of SIP installment per week, in a mutual funds scheme with an expected return of 10%. The amount is automatically deducted on the required date. His total amount invested in five years is Rs 1,30,000. The amount accumulated at the end of the tenure will be around Rs 1,68,785 (as per the SIP calculator, it is an expected return and not an actual return).
Monthly SIP vs Weekly SIP
If you compare the numbers mentioned in the above paras, you will notice that there is not a huge difference in the amount accumulated from the Weekly SIP than a monthly SIP. So basically, we can say that, whether it is a monthly SIP or weekly SIP, they have no major impact on the corpus built or accumulated. Thus, it is an investor’s choice, what he prefers, monthly SIP, or weekly SIP.
Weekly SIP Installments can help investors, reduce the risk by timing the market more frequently as compared to monthly SIP Installments. Also, they frequently average the purchase cost, help add a greater number of units when the market is low, and maximize profits. However, in the case of weekly SIP’s, it becomes much difficult for the investor to track and manage the cash flows, as they have to invest every week and manage their investment every week.
It is advised by the experts if you are a salaried person, then monthly SIP Installments 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. Secondly, if you opt for a weekly SIP Installments, then there is increased paperwork and you need to keep a constant record. A monthly SIP will not require you to monitor it constantly.
If we conclude, then I should say, the most important thing is inculcating a habit of preparing a household budget, saving a good amount, and investing a part of your savings in mutual funds.
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