What is smart SIP? Everything you should know

Many investors are opting for mutual funds through the Systematic Investment Plan (SIP) method as a popular investment choice. This service enables you to regularly invest a set amount in the mutual fund of your choosing. A methodical investing strategy assists in building wealth over time.

Over time, mutual fund companies have unveiled various new SIP features to meet the requirements of different investor profiles. One of the options is the Smart SIP choice.

What is smart SIP?

A Smart Systematic Investment Plan (SIP), also referred to as Flex SIP, is an investment approach that selects the best investment opportunities by considering factors such as historical data, market trends, etc. The investment is carried out automatically according to market conditions. For instance, during a market decline, a Smart SIP will boost the investment value and allocate funds to equity schemes. On the other hand, if the market appears overvalued, only a portion of the SIP funds will be allocated to stocks while the rest may be put into a money market fund.

Therefore, Smart SIPs utilize algorithms or computer programs to decide on investment locations by taking into account various factors like price-to-earnings ratio, price-to-book ratio, and more.

Features of Smart SIP 

Flexibility

Smart SIP investments give you the flexibility to reduce or increase your SIP units at any time.

Regular Investing 

Smart SIP offers you the opportunity to invest a set amount periodically at a time that suits you. This assists you in saving and investing with discipline.

Systematic Investment 

It is a systematic investment approach that can minimize the influence of market fluctuations on your overall investment holdings.

Cost-effective 

Smart SIPs provide a cost-effective investment option, allowing individuals to invest small increments rather than requiring a large initial investment.

Transparency

Smart SIP gives you full visibility and control over your investment portfolio, allowing you to monitor how your investments are performing and make well-informed decisions.

How Does a Smart SIP Works?

Let us know how Smart SIP works through the following steps:

Step 1: Choose the optimal SIP option that matches your risk tolerance and investment goals.

Step 2: Establish a Smart SIP Plan by specifying the base amount, as well as the amount, frequency, and duration restrictions for your SIP investments.

Step 3: By evaluating the dynamic market valuations, the SIP amount and investment intervals in mutual funds/ ETFs vary after setting up your Smart SIP.

Step 4: A higher number of SIP asset units are purchased during market downturns, while fewer are bought during market upswings. This assists in lowering the average investment cost and achieving increased returns over the long run.

Step 5: You have the flexibility to adjust your Smart SIP investment terms by modifying the investment amount and duration based on your evolving financial objectives or market circumstances.

Step 6: Regularly check your Smart SIP investments to make sure they match your investment goals and risk tolerance.

Benefits of Smart SIP:

•  Efficiency: Smart SIP removes the necessity for investors to consistently watch the markets and make investment choices. This helps save time and effort     by making sure investments are maximized for growth.
•  Data-Driven Decisions: Utilizing data analysis and AI-driven insights decreases human mistakes and improves the precision of investment decisions.
•  Adaptability: Smart SIP systems can respond quickly to changing market conditions, ensuring that the investment plan aligns with the investor's objectives.
•  Accessibility: Due to the emergence of mobile apps and internet platforms, investors can conveniently handle their Smart SIP accounts on their smartphones, broadening access to investing.

FAQs

Q. Is monthly SIP safe?

A. SIPs promote regular investing and foster financial discipline over time. The benefit of rupee of cost averaging reduces the impact of market volatility for long-term investments. SIPs make mutual fund investments safe and affordable for retail investors as there is no need for a lump sum amount upfront

Q. Is smart SIP good?

A. A smart SIP helps you to maintain your discipline by investing regularly and systematically, regardless of the market conditions. You can also benefit from the power of compounding and the law of averaging by staying invested for the long term.

Q. Is SIP tax free?

A. Is SIP tax-free? SIPs themselves are not tax-free, but they can be a powerful tax-saving tool. Here is why: SIPs are a way to invest in certain mutual funds, like Equity Linked Saving Schemes (ELSS).

Q. Which SIP gives 40% return in India?

A.There are eight large cap mutual funds which have delivered over 40 percent return in the past one year. These include Quant Large Cap Fund, Bank of India Bluechip Fund, JM Large Cap Fund and Nippon India Large Cap Fund, among others.