Best frequency for SIP in MF Manasi Reddy, 28 May 2013

I want to start an SIP in mutual fund. Which one of daily, monthly and quarterly SIP will be better?

Fintotal Answer

The purpose of SIP is to get exposure to market movements and average out cost of investment. So theoretically daily SIP serves the purpose best. But dialy SIP is not recommended because it loses on other areas. Firstly convenience is an issue. Banks would not accept Standing Instruction for a daily transfer from your account. Secondly there is the risk of missing SIP if adequate funds are not maintained in your bank account daily. Thirdly and most importantly calculating capital gains taxes will be very cumbersome in case of daily SIP. Quartely SIPs don't give the desired results in equity fund SIP since market movements are not captured well enough. It is best to stick to monthly SIP for all practical purposes.

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