Daily SIP

Daily SIP simply refers to investing a small amount of money, as small as Rs 10, every trading day. Just like a monthly SIP, the investment amount is automatically debited from your bank account and invested in the chosen mutual fund. 

The way a daily SIP works is almost identical to a regular monthly SIP.

• You choose a mutual fund scheme to invest in.
• Select "daily" as the SIP frequency.
• Decide the daily investment amount.
• Register an auto-debit mandate.

Once you complete these steps, the amount gets invested every trading day. Against this amount, mutual fund units are purchased based on that day's Net Asset Value (NAV). Since the NAV changes daily, every instalment buys a different number of units.

Example of a Daily SIP: Let’s say you invest Rs 200 every trading day.

At the end of the week:

Your total investment would be = ₹1,000

The total units purchased would be = 50.25

Instead of worrying about market highs and lows, your investments continue automatically. However, investing daily isn't enough to reach your goal. You should also know how much to invest to build the required corpus within the intended time period and this is where you would require the help of a daily SIP calculator.

To help you decide, here is the list of benefits of investing through daily SIP:

• Better Rupee-Cost Averaging

One of the biggest benefits of investing in a mutual fund scheme via daily SIP is that the units are purchased more frequently. As mutual fund NAVs fluctuate every trading day, making investment daily allows you to spread your purchases across multiple market levels every trading day. When the markets go down, your investment buys more units. When the markets go up, fewer units are purchased. Over time, this averages your purchase cost, known as rupee-cost averaging. Although monthly SIPs also offer rupee cost averaging, daily SIPs capture more market price points.

• Eliminates the Need to Time the Market

Predicting the best day to invest in mutual funds is almost impossible, even for seasoned investors. With daily SIPs, there is no need to time the market as your money automatically keeps getting invested in the chosen scheme(s) on every trading day. This kind of disciplined approach helps you remain invested irrespective of market volatility.

• Encourages Consistent Investing Habits

Daily investments or SIP in general help in creating a strong investing habit. By allowing you to invest small amounts every trading day, much like saving, it encourages you to think of investing as a regular financial activity instead of an occasional one. This consistent investment approach helps in building long-term wealth over time.

• Suitable for Investors with Daily/Irregular Income

Not everyone receives a monthly salary. Many professionals earn income every day, including freelancers, gig workers and other self-employed professionals and non-professionals. Daily SIPs allow such individuals to invest as per their income pattern instead of waiting until month-end.

• Potentially Reduces Impact of Short-Term Volatility

As investments are spread over daily, sudden up or down movements in the market on a single day have a relatively lower impact on the overall investment. This may provide psychological comfort to investors during volatile periods.

Here’s a 3-step process to start your daily SIPs today on Paisabazaar:

Step 1: Open the Paisabazaar app.

Step 2: Tap on “Mutual Funds” under “Investment Products”.

Step 3: Tap on the desired mutual fund scheme and then on “Start SIP”.

Step 4: Tap on the “Daily SIP” tab and select the SIP amount.

Step 5: Complete the KYC process.

The entire process takes only a few minutes.

• Ensure regular cash availability - Your bank account should have sufficient balance every trading day to avoid SIP failures.
• Choose the amount carefully - The daily amount may seem small but the cumulative monthly investment can become significant. So, choose an amount that is within your budget.
  

• Invest for a long term - Daily SIPs should ideally be continued for a long term to benefit from the power of compounding and ride out market volatility.
  

• Choose the right mutual fund - The SIP frequency matters far less than selecting an appropriate mutual fund based on your financial goals, investment horizon and risk appetite.

Daily SIPs may be suitable for:

• Investors with daily cash flow - Individuals receiving income every day can align investments with their earnings.

• New investors - Small daily investments may feel more manageable than investing a larger amount once every month.

• Investors seeking greater investment discipline - Daily investing creates a regular savings habit and reduces the temptation to spend surplus money.

• Long-term wealth creators - Daily SIPs work best when continued consistently for several years.

Taxation remains the same regardless of SIP frequency. Each SIP instalment is treated as a separate investment for capital gains purposes. The tax applicable depends on:

• Type of mutual fund (equity, debt or hybrid)
• Holding period of each instalment
• Applicable capital gains tax rules prevailing at the time of redemption

Also Check: Our SIP Return Calculator

Myth 1: Daily SIP always gives higher returns.

Reality: Investment returns depend on the underlying assets, fund performance, market conditions,   mutual fund scheme type,  and market performance, not just the SIP frequency.

Myth 2: Daily SIP is only for experienced investors.

Reality: Beginners can also opt for Daily SIPs if they are comfortable with daily investments and have a steady cash flow.

Myth 3: Daily SIP eliminates market risk.

Reality: Daily SIPs help average purchase costs but cannot eliminate market risk.

Myth 4: Daily SIP requires monitoring every trading day.

Reality: Once registered, the investments happen automatically through the SIP mandate.