Monthly SIP vs. Yearly SIP
The primary difference between the two best SIP plans lies in the timing and frequency of capital investment.
| Feature |
Monthly SIP |
Yearly SIP |
| Frequency |
12 investments per year |
1 investment per year |
| Rupee Cost Averaging |
Higher effectiveness; invests across 12 different market price points. |
Lower effectiveness; invests at a single market price point, similar to a lump sum. |
| Compounding Effect |
Returns are reinvested and start compounding more frequently. |
Less frequent compounding; the large sum sits idle longer before investment. |
| Discipline & Budgeting |
High discipline, aligns perfectly with the monthly salary/income cycle. |
Low discipline, requires managing a large annual surplus. |
| Minimum Investment |
Usually lower (e.g., ₹100 or ₹500 per month). |
Requires a higher minimum annual commitment. |
| Psychological Impact |
Less affected by short-term market dips as the investment is spread out. |
Higher chance of missing a good entry point or buying at a market high. |
- Insurance Companies
- Mutual Funds
|
Returns |
| Fund Name |
5 Years |
7 Years |
10 Years |
| SBI Life |
13.34% |
13.33% |
|
| HDFC Life |
19.5% |
15.78% |
|
| Axis Max Life |
29.43% |
23.7% |
|
| ICICI Prudential Life |
16.1% |
14.86% |
|
| Tata AIA Life |
29% |
23.3% |
|
| Bajaj Life |
17.22% |
14.25% |
|
| Birla Sun Life |
19.5% |
16.26% |
|
| PNB MetLife |
31.41% |
24.68% |
|
| Canara HSBC Life |
12.99% |
11.79% |
|
| Star Union Dai-ichi Life |
14.54% |
- |
|
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Last updated: Dec 2025
Advantages of Monthly SIPs
For most investors, especially those with a regular monthly salary, the monthly SIP is overwhelmingly the more convenient and effective choice.
-
Superior Rupee Cost Averaging
This is the single biggest reason. Rupee Cost Averaging is a fancy term for a simple idea: investing a fixed amount at fixed intervals, no matter what the market is doing.
- With a monthly SIP, you are buying into the market 12 times a year. That means you hit 12 different price points.
- When the market dips (a good time to buy!), your fixed amount grabs more units. When it climbs, you buy fewer.
- This constant, rhythmic buying action smooths out your purchase cost over time. It’s your best defence against accidentally investing a huge chunk of money right before a market crash!
-
Alignment with Cash Flow
Most of us get paid monthly. A monthly SIP syncs up perfectly with your cash flow—it’s automatic, effortless, and quickly becomes a good financial habit. This consistency, month after month, is the foundation of building long-term wealth.
-
Power of Compounding
Though the difference is marginal over very long periods, more frequent investments allow your returns to start the magic of the power of compounding sooner and more often. This slightly increased frequency of compounding can contribute to a marginally larger corpus over decades.
Which Is The Best SIP Plan?
The best choice between the SIP investments depends entirely on your financial behaviour and income pattern.
- For Salaried Individuals: The monthly SIP is the recommended best SIP plan due to its superior Rupee Cost Averaging and perfect fit with a monthly salary cycle, reinforcing financial discipline.
- For Irregular Income Earners: The yearly SIP offers necessary convenience and simplicity for those who receive their investable capital in a single, large annual sum.
Ultimately, consistency beats frequency. Choose the frequency that you can stick with for the long term to benefit from the power of compounding in your SIP investments.
Conclusion
In the world of SIP investments, while the difference in long-term returns between frequent SIPs (daily, weekly, monthly) is often marginal, the single most important factor is consistency. Choose the frequency that ensures you invest without fail and stay invested for the long term to fully reap the benefits of the power of compounding.
