Timing the market is completely unrealistic dream and a trap that an investor can lay for himself. Secondly, if you go for daily SIPs then also you will over do the overall goal of disciplined investing. There are few things one should consider even while choosing the appropriate date for a SIP.
1) The frequency and date of income – As one of the thumb rules of investing is to carve out investments before spending from income, the date and frequency of your income plays a crucial choice in deciding your date of investments. Mostly in case of salaried persons, like me, the date of SIP must coincide with the date of salary being transferred into bank a/c. Like in my case salary is generally credited between 12-14th of every month so most of my SIPs are on or after 15th of every month.
If you have irregular income like in case of business/professional income, you can start a separate bank account which may maintain sufficient balance only to meet your monthly SIP/insurance obligations. It is similar to the envelop strategy suggested by many financial planners and I think Hemant has also suggested it in one of his posts.
2) Market falls near to settlement days – In case of human memory we are more influenced by recent events rather that events that occurred long ago. We have been going through a mostly volatile market for last 3-4 years since Feb-08. Therefore the speculative traders take positions during the month and try to square off their losses at settlement. I DID NOT SAY INVESTORS. If you look at monthly charts available on sites of BSE and NSE for a period of 2-3 years covering the duration before May-08, you will most likely see that markets did not corrected sharply on these days but actually gained. Therefore markets are more of a barometer of the sentimental (and not rational) mood swings of speculators during a bull or bear cycle.
3) Daily SIP – In the end the total monthly investible corpus of most individuals remain static for a usually a period betweeen 6 months to 12 months (especially in case of salraied persons) as their expenditures increase instantly but usually incomes increase after a lag. Therefore, if one has say Rs. 10,000/- pm for investments as SIP in each month, and he is investing it equally in 5 MFs, then probably either he will have to invest more or less if he goes for daily SIPs. Take the following example, assuming a daily SIP of Rs. 100/- (I think it is the least you can invest through daily SIPs):
Ex 3.a) Suppose a month has 23 trading sessions then you will end up paying Rs. 2,300/- for each of you SIPs compounding to an excess of Rs. 1,500/- for that month.
Ex 3.b) Suppose due to more holidays etc., a month has only 17 trading sessions then you will end up paying Rs. 1,700/- for each of you SIPs leading to a shortfall of Rs. 1,500/- for that month.
Therefore in any case it not remain that much disciplined. Even the companies that were offering daily/weekly SIP options are taking a hard look at these as the ration of overheads to investment is very high. Mostly in case of overheads such as bank charges and record keeping the costs are static and do not vary with the amount of SIP.
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A suggestion that could be well in line with your intent of timing the market while avoiding the pitfalls of such timing: If you have 3 or more SIPs, then you can stagger them on different dates like one each on 1st, 7th, 14th, 21st and 28th of the month. BUT, again having too many funds may not serve the best interest of the goals you may have set. Select a few good funds and spread them over the month.
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