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A Systematic Investment Plan (SIP) has become one of the most popular modes of investment for the common man. An SIP requires you to invest a particular sum at periodic intervals like every week or every month.This makes it easier for an investor because they can invest small amounts over a period of time and let their investment grow gradually.But there is always the conundrum of choosing your SIP interval - should you go for a monthly SIP or a weekly SIP? Let us understand the major advantages of both.
Features of a weekly SIP
- In a weekly SIP, you’re required to pay the invested amount every week on a particular date.
- Due to the higher frequency of payments, you do not have to worry about timing the market. Since you will be investing every week, the risk of investing at the wrong time is reduced.
- Additionally, because of the higher number of purchases, you can benefit from averaging the purchase costs and get a higher number of units at the end. In this way you effectively negate market fluctuations.
- One of the disadvantages of a weekly SIP is that it can be difficult to keep track of the cashflow and you will of course need sufficient funds every week to invest.
Features of monthly SIP
- In a monthly SIP, the invested amount is deducted from your account every month on a particular date.
- A monthly SIP is usually better suited for salaried individuals because the SIP deduction can be scheduled after you receive your salary.
- Since most of us set our budgets and expenses on a monthly basis, a monthly SIP is much more convenient.
Conclusion
Thus, both a weekly and monthly SIP have their own advantages. If you’re a confident investor and would want to invest at a more regular interval, you can choose a weekly SIP and benefit from cost averaging. However, if you’re looking for convenience and want your investment to coincide with your monthly budgeting, then go ahead with a monthly SIP. It all depends on your own requirements.
DISCLAIMER
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
