Which Is the Best Date for a SIP?

Some believe markets dip at certain times of the month, for example around derivatives expiry or when salaries are invested. Others have seen a chart comparing SIP dates for one fund over a few years, where one date came out ahead.

Those patterns are real in narrow periods, but they change from year to year and from fund to fund. They are not a reliable rule.

When people compare SIPs on different dates over long periods, the final values usually come out very close. One date wins in one period and another wins in the next. There is no date that consistently beats the rest.

That makes sense. Over ten or fifteen years, every date catches the big rallies and falls. Day-to-day differences within a month are small compared with those big moves. Past patterns are not a promise about the future.

The best SIP date is usually one or two working days after your salary or main income arrives. The money is in your account, the SIP goes out before you spend, and the debit almost never fails.

If your salary comes on the 1st, a SIP on the 3rd or 5th works well. If it comes at month end, pick the 1st or 2nd. Our page on SIP autopay explains how mandates work.

If your SIP date falls before your salary arrives, the debit can fail. You may pay bank charges for a failed mandate, miss that month investment, and after repeated failures, the SIP may be cancelled.

Any tiny advantage from a "better" date is wiped out by one or two bounces. Our post on missing a SIP payment explains the consequences.

If your income is irregular, such as from business, farming or freelance work, choose a date when your account usually has the most money, or keep a small buffer in the account so the SIP never fails.

Our pages on investing as a business owner and investing as a freelancer explain how to handle uneven income.

Some people split their SIP into two or three smaller SIPs on different dates, hoping to average better. It does not hurt, but it does not help much either, and it makes tracking slightly more work.

If splitting helps your cash flow, for example if income arrives twice a month, it can make sense. Otherwise, one SIP on one date is simpler. Our page on daily versus monthly SIP explains why frequency matters little too.

On your SIP date, the money is debited and units are allotted at the NAV of that day or the next working day, depending on when the money reaches the fund house. If the date falls on a holiday, the SIP is processed on the next working day.

Our page on the cut-off time explains how NAV is applied.

Some fund houses allow you to change the date of an existing SIP. In other cases, you stop the old SIP and start a new one on the new date. It is usually a simple process.

If you start a new SIP, make sure the old one is fully cancelled so you do not pay twice in a month. Our post on stopping a SIP explains the steps.

If you have several SIPs, putting them all on one date is easy to remember. But if the total is large compared with your account balance, spreading them across a few days after salary can reduce the chance of a bounce.

Either way, keep a list of all SIPs and their dates. Our page on how to track your portfolio suggests a simple tracker.

• Starting early, rather than waiting for the right date.
• The amount you invest, and raising it each year.
• Not stopping in a falling market.
• Choosing suitable funds for each goal.

Our page on step-up SIP explains how to raise your SIP automatically.

Some people wait weeks for a particular date to start. That delay usually costs more than any date advantage. If you are ready, start now with a sensible date after your salary.

Our page on the best time to start a SIP explains why starting matters more than timing.

1. Note the date your salary or main income usually arrives.
2. Add one or two working days for safety.
3. Check whether that date is allowed by the fund house; most allow many dates in a month.
4. If you have big fixed payments like rent or an EMI just after salary day, make sure the account still has enough for the SIP.
5. Set the SIP and forget about the date.

That is all it takes. Spending more time than this on the date choice rarely pays off.

Some employers pay salary on the last working day of the month, which can shift by a day or two. If that applies to you, choose a date in the first few days of the next month rather than the 30th or 31st, which do not exist in every month anyway.

• No date consistently gives better returns.
• Pick a date one or two days after your income arrives.
• Avoid bounces; they cost more than any date effect.
• Start now, do not wait for a perfect date.

We are distributors rather than investment advisers and we recommend no schemes. If you want help setting up a SIP that fits your salary cycle, get in touch.