The frequency doesn’t matter
There’s a very peculiar tendency of investors to focus on things that don’t matter than on things that do. The frequency of SIP is one such things investors waste time over. A lot of people think a daily SIP is better than a monthly one. But the reality is, the frequency doesn’t matter.
Here’s a simple illustration of a daily, fortnightly and monthly SIP in Nifty from 1/1/2000.
- Rs 100 invested in Nifty 50 daily from 1/1/2000 to 18/10/2022 would’ve earned a CAGR of 14.36%
- Rs 1500 invested in Nifty 50 fortnightly from 1/1/2000 to 18/10/2022 would’ve earned a CAGR of 14.35%
- Rs 9000 invested in Nifty 50 monthly from 1/1/2000 to 18/10/2022 would’ve earned a CAGR of14.33%
- Rs 9000 invested in Nifty 50 quarterly from 1/1/2000 to 18/10/2022 would’ve earned a CAGR of14.29%
There’s no difference what the frequency is. It’s the same with dates either, choosing one date or the other doesn’t lead to better SIP performance in the long run.
Important things to focus on:
Keep things simple and focus on more important things like:
- Your savings rate matters more than your savings.
- Always ensure that you increase your SIPs every year as your incomes grow. Use the step-up SIP on Coin.
- your asset allocation drives a large part of your portfolio returns. Ensure you decide on an asset allocation that allows you to sleep peacefully at night If your investments are keeping you awake, you are doing something wrong.
- Don’t waste your time on pointless things like SIP frequency and dates. There are better things to do in life, such as watching Brahmastra.
- Your human capital or your future earnings potential is your biggest asset. Focus as much as you can on developing it.
Do check out the Varsity chapter on ” Introduction to Asset Allocation”
Read more on this topic :
You can run the numbers yourself and check the SIP Frequency calculator spreadsheet in the above article.
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I really liked these points
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I hope you are a ranbir kapoor fan and watched brahmastra Just Kidding
Thanks and hoping to see your active participation on TQnA in the coming times
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