Should a SIP as spread out as possible, or minimize time spent by money in savings accounts?

Question

In the context of India, where money in savings accounts gets 4% interest (tax free for me) per annum, and SIP frequency doesnt affect my transaction costs in any way

I'm trying to understand, which is a better way to structure a SIP, assuming I have INR 30,000 to invest every month, and I get the money on the last day of the month, there are 2 extremes:

• I Invest all the money on the 1st of the month
• I Spread out the investment at Rs 1000 per day over the month

And everything in between, such as once every 15 days

(A SIP is a method to invest a fixed amount of money in a specific mutual fund on a specified frequency automatically)

Answer 1

which is a better way to structure a SIP,

This is no one way better than other. SIP as you already know offers advantages in terms of averaging costs.

Given that transaction costs are same, averaging daily would be better from law of averages point of view.

The only flip side to doing it daily is tracking, i.e. your Bank Statement is going to look horrible, recon as to what and how much got purchased will be horrendous. Further tracking liquidity could be an issue unless you use segregated accounts. i.e. you don't know how done you are with your investments.

On monthly this is more easy, once you get salary and get investments and other mandatory payments out of way, you know what you have in the account for rest of the month.

In the end I would put this more of convenience than anything else.