Actual Question
Is
a daily SIP of Rs. 2,000 in a mutual fund a better idea than a monthly SIP of
Rs. 60,000?
Dear
Friend!
You
have asked a very interesting question.
The
key concept behind a systematic
investment plan (SIP)
is to even out the price fluctuations. Since timing the market is extremely
difficult, wise people had devised to achieve the next best thing, the ‘Dollar
Cost Averaging
(DCA)’ through SIP.
Now
the focus shifts to your question regarding whether it is ideal to achieve DCA
by investing daily or monthly.
Of
course, it goes without saying that as the frequency of investing increases
better averaging is achieved.
If
this is so, why once a day?
Why
not every hour?
So
it is all about the question of reasonableness.
One
has to strike a balance between the improvement in results and the time and
effort involved in making investments. Obviously there is an opportunity cost
involved for the time and efforts expended!
And
finally in real investing, where we are talking about long times of two
to three decades, it really is not going to make much difference whether you
are investing through SIP on a daily basis or monthly basis.
To
conclude in the real world of true value
investing monthly SIP is adequate and one need not
take the trouble of investing daily to achieve better dollar cost averaging.
Related Articles:
- Miracle of Compounding
- What Are Investments Actually?
- What is the Best Frequency of SIP Investment Subscription?
- What Are the Alternatives to SIP Schemes?
Thank
you,
With
Best Regards,
Anand