The Concept of Daily SIP: How Daily SIP Works?

Many Mutual Funds in India have started the Daily SIP facility in India. The concept of SIP is not new. Investors do SIP (Systematic Investment Plan) for Rupee-cost-averaging. SIP over the long time, reduces your over all entry price in the market and gives your maximized returns.

Now, according to the theory, more the SIP frequency, the more will be rupee-cost-averaging. Up to now, minimum frequency of SIP was 1 month. But now many fund houses in India have started Daily SIP.

What is Daily SIP?

Simply, a Daily SIP collects a small sum from an individual on a daily basis and invests it in the market. It operates like any mutual fund, where the disbursement and handling of the money is the fund manager's prerogative.

In case of Daily SIP, rupee-cost averaging will occur on daily basis and thus gives you better results than monthly, quarterly or half-yearly SIP.

ING Vaysya & Bharti AXA have launched Daily SIP Schemes.

The minimum SIP amount for a Daily SIP is Rs. 300 (per day). The minimum period is for 6 months. Hence the SIP amount for the 6 month period works out to Rs. 300 day x 6 months x 25 days (considering we will have 25 trading days in a month on an average) = Rs. 45000.

This option is also a good choice for an investor who wishes to do a SIP for more than Rs. 7500 a month. Instead of investing at Rs. 7500 on a single investment, it would be good to go for a Daily SIP (Rs. 300 per day x 25 trading days per month (approx) = Rs. 7500).

Daily SIP offers rupee cost averaging on a daily basis and hence is considered as a good choice for investors who want to invest their money on a daily basis and yet put their investment decisions in the hands of experts.

Advantages of Daily SIP -

• With a Daily SIP, your investment is staggered. Instead of a lump-sum amount, you invest a pre-specified amount in a scheme at pre-specified intervals at the then prevailing NAV (Net Asset Value).
• Consistent monetary contributions average out the crests and troughs of any market, in the long term.
• It also captures the daily levels of market volatility. In case of a monthly SIP, you still can lose out if the markets are up on the chosen day of the month. The daily SIP, however, eliminates this flaw and lets you benefit out of equity market volatility.
• If you're looking at a lump-sum investment, then going in for a daily SIP would allow you to take advantage of the market volatility, by splitting the lump sum amount in to daily instalments over a relatively short time frame.
• The Daily SIP is ideal for small time savers, since the threshold investment level is low.
• Once you start with a Daily SIP, you invest at the appointed time and that makes you a disciplined investor.
• With Daily SIPs, you capitalise on the periodic dips in the market and accumulate a greater number of units at lower levels -- and over time, reduce your average unit cost.
• You avoid the lure and trap of trying to predict the market.