SIPs have in recent times gain a major investment share owing to the discipline as well as the benefit of cost averaging and though not a new scheme as the daily SIP, two of the mutual fund houses namely LIC and HDFC Securities have yet again offered the daily SIP option in equity schemes.

The different modes of making SIP investment are for the convenience as well as better cost averaging for the investor. But the daily SIP option can serve the investment and saving needs of daily earners who instead of spending all their earnings of the day can invest a small portion through daily SIPs.

The scheme can be suitable for those who have a daily income flow and either their money idle in bank accounts or place them in risky bets.

If experts are to go by, SIP investment if made in a daily mode for a longer tenure could result in better cost averaging as well as higher returns of by 20-40 basis points in comparison to the returns made from monthly SIP.

Nonetheless some of the disadvantages of the daily SIP in funds cannot be ignored which include:

1. More number of transactions for an investor to keep track of.

2. Not much substantial difference if longer term investments are taken into account say for a tenure of 5-10 years.

3. Unnecessary reconciliation of statements will have to be done.

Also one aspect that needs to be highlighted here is the return from SIP depends on the type of fund chosen for SIP. If its highly volatile say some mid or small cap fund then mode of SIP won't make much difference but the investor will stand to lose significantly if the fund is not volatile.

If not diligently chosen, the daily SIP option results in heavy averaging out of returns through daily investments in the market. So, in case the fund is not volatile it is suggested to avoid the daily SIP option.

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