Timing it right: What is the best day to start a SIP?

Systematic Investment Plan, or SIP, is emerging as a popular investment method. It offers a means for disciplined investing, as you set aside a fixed sum of money every month for future savings. A SIP offers potential for long-term wealth creation, as you gain from the power of compounding and can get a diversified portfolio with just one investment, which is managed by an expert.

But what is the right day to start a SIP? In Episode 8 of Mint Money Shots, presented by Invesco Mutual Fund, Deputy Editor at Mint, Neil Borate, attempted to answer this crucial question that is prime on the mind of every mutual fund investor when they think of a SIP and unravel the truth behind ‘ideal’ SIP start dates and whether these impact your investments. Watch the full episode here,

Rupee cost averaging

Research indicates that over the long run, the exact date that you invest each month doesn’t significantly impact your returns. One of the main reasons for this is that SIPs help you average out the cost of your investment.The essence of SIPs lies in their ability to average out market volatility. When the market is high, you buy fewer units, and when it’s low, you buy more. This helps smooth out the impact of market fluctuations over time. This process, known as rupee cost averaging, helps mitigate the risks associated with market timing as, over time, you can potentially lower your average purchase costs.

Consistency and discipline

When you invest in a SIP, you set aside small amounts regularly and over time, the returns on your investments start earning more returns for you. This is known as the power of compounding, which can lead to significant wealth creation in the long term. You don’t need to have a large pool of savings to start a SIP – you can start with as low as ₹100, making SIPs accessible to everyone, regardless of their income levels. In fact, most Mutual Fund houses even allow you to pause the SIP or increase/ decrease the amount for some time if required. The idea is just to stay consistent.

Choosing the right day

So, is there something called the best day to start a SIP? “The answer is simple – choose a date that is convenient for you, typically just after your salary day. This makes sure you have funds available for investment before they get spent elsewhere,” said Borate, taking the practical solution to choose the right date.

He concluded the session with some golden words: “Remember, in SIP investing, ‘time in the market’ often beats ‘timing the market.’ The longer you stay invested, the more you benefit from compounding and the growth opportunities in the equity markets. To conclude, don’t stress over finding the 'perfect' date for your SIPs. Focus on starting early, being consistent, and staying disciplined. The best day to start is today!”

(This article is part of Mint's video series Money Shots, sponsored by Invesco Mutual Fund)