Does the Frequency of SIP make a difference while investing in Mutual Funds?

Systematic Investment Plans (SIPs) in mutual funds can be done at multiple frequencies – daily, weekly, monthly and quarterly and so on. A common dilemma in an investor’s mind tends to be the choice of frequency when doing an SIP in a scheme. Against this backdrop, let us look into the data to clear that dilemma.

Let’s consider 4 frequencies – daily, weekly, monthly and quarterly of an investor’s ongoing SIPs in the Regular Plan of HDFC Flexi Cap Fund (the Scheme). The chart below shows the SIP returns generated under different frequencies vis-à-vis NIFTY 500 TRI over a 5-year and 10-year Period ended March, 2023.

Source: Internal, MFI Explorer, Returns as on March 31, 2023. SIP done at the end of every *business day / week / month / quarter. CAGR returns are computed after accounting for the cash flow by using XIRR method (investment internal rate of return)

The above performance is depicted to only illustrate the principle. Past performance may or may not be sustained in the future. For Performance in SEBI prescribed format, please refer page 4.

As we can observe from the table above, among the frequencies chosen, the divergence in returns for the Scheme and NIFTY 500 TRI for both time frames is very low.

It turns out that starting an SIP, and continuing with it for a long period, is more important than the frequency of SIP.

An interesting and an encouraging trivia: 77% of the SIP investors in the Schemes of HDFC MF have chosen for an investment tenure of over 10 years.