SIP vs smart SIP: To get higher MF returns, this is what you should do
Systematic investment plan (SIP) is considered to be the best option for investment in mutual funds, but now the smart SIP has pipped SIP to emerge as a better investment tool
Systematic investment plan (SIP) is considered to be the best option for investment in mutual funds, but now the smart SIP has pipped SIP to emerge as a better investment tool. The Smart SIP gives you more benefit than a normal SIP. Talking about Smart SIP, Omkeshwar Singh, Head of RANK MF SAMCO, told Zee Business that the times are changing and along with it the methods of investment are also undergoing change. In the era of smart times, new ways of smart investment have also emerged. Smart SIP, therefore, is now a new way of making investment in mutual funds. This system works on the principle of buying cheap and selling for high.
This is how it works
In fact, investments under smart SIP are made considering the market move, whereas investment in regular SIP are made in selected funds in every situation. Through smart SIP, you can invest in liquid funds during high risk, and increase your investment in equity when the risk is low. In this way, smart SIPs get higher returns.
Advantages of Smart SIP
Under smart SIP, parameters are set to determine the value of a scheme, and the risk status is measured through Net asset value (NAV). If the margin of safety is low, then the fund will be invested in safe option. In such a situation, SIP is put in liquid funds, and if the safety margin is good, then the money will be invested in equity.
Difference between SIP and Smart SIP
In the regular SIP, you pay installment every month and the same is invested in equity funds. In a normal SIP, funds are invested in equity funds even when there is a high risk, while investments are made in equity even when the risk is low. Further, money is invested in fixed funds under the regular SIP.
Smart SIP, however, is slightly better than regular SIP. Investment in Smart SIP is made after witnessing the fluctuations in the market. If the risk is less in the market, then investment is to be made in equity, while the same is made in liquid funds if the risk is more in the market. This how investor earns more benefit and the risk is also less.
How much return will you get
Although there is no system to manage risk in regular SIP, investment in smart SIP is made after knowing the risk. Therefore, smart SIP is expected to give higher returns than regular SIP.
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Trigger Based SIP
Many fund houses offer trigger based SIPs. If the benchmark index arrives at a particular valuation, then the investment amount changes in such a situation.
Notably, Kotak Mutual Fund offers the facility of Flexi SIP.
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