Our fancy for higher returns never ends! And for this we devise different techniques and strategies – one of them is “Timing the Stock Market” – in which you buy when markets hit the bottom & sell when its at the top.
A very popular and simple concept but the only problem is no one has got it right every time!
And to get rid of this “Market timing Psyche” Advisors came up with the concept of SIP or Systematic Investment Plan which is supposed to help investors get out of lure of timing the markets and invest regularly. But then there are people who still want to “time their SIP in Mutual Funds”.
I have often come across questions like these:
- Is it good time to start SIP in equity Funds?
Is it possible to time my SIP so that I get the best returns?
Which is the Best day for SIP?
Which day of month should I choose for my SIP and Why?
Well all these questions because somewhere Investors feel that they can outsmart markets to get some extra returns. And true little more doesn’t hurt if we get it just by just altering date of our SIP. In this post I would analyze how the returns have been if you done SIP on a particular date historically.
Best Day for SIP in Mutual Funds – My analysis:
I did this analysis a few years back and hence the data is bit dated, but the concept still holds true!
For my analysis I choose the closing point of NIFTY for the period of 1st January 2000 – 31st December 2009 (ten year period). Here I assumed that I could buy 1 unit of NIFTY by paying amount equal to its value, for e.g. As on 31st December 2009 the value of NIFTY was 5201.05, so I assumed that I could buy 1 unit of NIFTY by paying Rs. 5201.05.
The second thing is I calculated how much units of NIFTY I can buy monthly with a SIP of Rs 10,000 every month.
All my calculations are based the way real SIP happens, i.e. if the market is closed on the SIP date then that investment is done on next business day. For e.g. If you do SIP on 1st of every month & market is closed on 1st your SIP would happen on next day when markets open which may be 2nd, 3rd, 4th or 5th.
Best day for SIP in my analysis means the day when you could buy the maximum number of units while worst day is just the opposite.
Calculation Sheet for every Year:
The table below shows the total NIFTY units I could buy in respective years if I did a SIP on the respective date. At the end of table I have mentioned the day which was best & worst for SIP. The last row has the percentage gain you would have made had you invested on best day over worst day.
|Best SIP Day||23||27||28||1||16||23||13||10||27||9|
|Worst SIP Day||9||5||15||28||7||28||27||26||2||27|
|# Units Purchased on Best Day||88.5||109.6||115.7||102.5||69.8||53.9||36.6||27.3||30.6||31.6|
|# Units Purchased on Worst Day||82.6||107.4||112.9||100.1||67.7||53.3||35.5||26.3||28.2||30.3|
|% Gain (Best Over Worst Day)||7.10%||2.00%||2.50%||2.40%||3.10%||1.20%||2.80%||3.70%||8.30%||4.40%|
Best Days for SIP: 23, 27
Worst Days for SIP: 27, 28
Its amazing to see 27th occur as best day twice and also worst day twice in the period of 10 years. This proves to an extent that timing the Market by choosing SIP dates is a futile exercise.
Also Read: Tax on Equity and Debt Mutual Funds
Calculation Sheet for every 3 Years
Now usually we don’t do SIP for 1 year, we should do SIP for a minimum of 3 years. So I did the same thing as above for the 3 year period. Here you can see the percentage gain you would have made had you invested on best day over worst day reduces.
|SIP Date||2000 – 02||2001 – 03||2002 – 04||2003 – 05||2004 – 06||2005 – 07||2006 – 08||2007 – 09|
|Best SIP Day||23||23||1||1||20||1||24||24|
|Worst SIP Day||9||9||8||28||5||26||2||14|
|# Units Purchased on Best Day||312.3||325.8||286.3||225.5||159.9||117.5||93||87.5|
|# Units Purchased on Worst Day||303.7||322.7||283||222.3||157.6||115.3||91.5||86.7|
|% Gain (Best Over Worst Day)||2.80%||1.00%||1.20%||1.40%||1.50%||1.90%||1.70%||0.90%|
Best Days for SIP: 1, 23, 24
Worst Days for SIP: 9
Calculation Sheet for every 5 Years and 10 Year
Well some people do it for 5 years, so I do the same thing for a period of 5 year. The last column shows the same thing for the entire analysis period of 10 Years.
|SIP Date||2000 – 04||2001 – 05||2002 – 06||2003 – 07||2004 – 08||2005 – 09||2000 – 09|
|Best SIP Day||23||23||1||1||20||20||23|
|Worst SIP Day||9||9||6||28||5||26||9|
|# Units Purchased on Best Day||483.8||449.2||376.6||289.1||216.4||177.7||660.9|
|# Units Purchased on Worst Day||473||444.1||372.9||284.5||213.2||176||650.2|
|% Gain (Best Over Worst Day)||2.30%||1.20%||1.00%||1.60%||1.50%||1.00%||1.60%|
Best Days for SIP: 1, 23, 20
Worst Days for SIP: 9
So finally the question – what are best days for SIP?
Based on overall analysis, if I look at 3 year running SIP, 1st, 23rd & 24th seems to be the best days while 9th seems to be worst.
The days are almost similar for 5 year period too.
But your gains had you chosen the best day over worst varies from 0.9% to 2.8% in 3 year period & 1% – 2.3% for 5 year period. And these gains are overall gains which if seen on annualized basis is not even 1%.
So if you are looking for SIP in a Mutual Fund for a long period of time say 5 years the selection of day hardly matters. Do it on the days most convenient to you. For e.g. for a Salaried person his SIP day may be close to day he gets his salary.
Also most investors don’t have just one SIP running. You may have 3-5 different Mutual Funds where you invest the SIP way. So it makes sense to spread out the investment for the entire month rather than concentrating them on a single day until you have some special convenience or requirement for doing so.
As we have seen a single day can be best for SIP in one year while it could turn to be worst the very next year. The other thing is 9th appears to be worst if we see cummulative return in 3 years, 5 years & 10 years basis but for individual year analysis it is worst just once in year 2000. All the above proves that the “BEST SIP Date” is just a random event and there’s nothing called “Best or Worst Day for Investment or SIP“.
I would advise investors to get out of the Market Timing mentality and start investing in Mutual Funds by using SIP (Systematic Investment Plan) for serious long term wealth creation.
Readers let me know what your SIP dates are and did you decide them because you wanted to time the market via SIP or just for your convenience?