Topic 1: Mutual fund investments: Here's all you need to know about 'Smart SIP'
Systematic Investment Plan or SIP, which encourages an investor to set aside a monthly fixed value of as little as Rs 500 and invest in equity mutual funds on a regular basis, basically ensures regularity of investments without trying to time the markets.
It also allows for averaging out the cost of purchase for an investor when he/she invests continuously across various market cycles of highs and lows. Throughout various phases of the market cycle, retail investors have seen the superiority of investing via the SIP route over the years.
As it happens with all things in life, after tasting success with the 'fixed' value SIP, investors started yearning for more. This led to the creation of Smart SIPs also called by other names such as - Opti/Variable/Step-up SIP.
So, what is 'Smart SIP'?
Smart SIP’ is increasing the instalment value as the market goes down. This enables an investor to invest more when the markets are on their way down thereby lowering the average cost of the purchase in a more dynamic and active manner.
"Various mutual funds offer a wide variety of the 'smart' logic used which allows this facility to an investor and the investor defines a minimum and maximum amount of instalment that he can afford to invest.
'Smart SIP’ books profits as a part of the existing equity units when markets are very expensive. The sale proceeds and monthly instalments are invested in liquid schemes.
Here are the key things to keep in mind while investing in 'Smart SIP':
1.Just like in fixed value SIP, continuity of these investments is important to ensure that the investor invests across various market cycles to gain the most optimum advantage of this cost-averaging tool
2.It is most important that an investor decides the maximum amount that he/she can afford to invest over a medium-term and defines the limit accordingly to gain the maximum advantage of a Smart SIP.
3.It is also important to understand the logic used behind the 'Smart SIP' and choose wisely amongst the various such options available with various mutual funds.
It also allows for averaging out the cost of purchase for an investor when he/she invests continuously across various market cycles of highs and lows. Throughout various phases of the market cycle, retail investors have seen the superiority of investing via the SIP route over the years.
As it happens with all things in life, after tasting success with the 'fixed' value SIP, investors started yearning for more. This led to the creation of Smart SIPs also called by other names such as - Opti/Variable/Step-up SIP.
So, what is 'Smart SIP'?
Smart SIP’ is increasing the instalment value as the market goes down. This enables an investor to invest more when the markets are on their way down thereby lowering the average cost of the purchase in a more dynamic and active manner.
"Various mutual funds offer a wide variety of the 'smart' logic used which allows this facility to an investor and the investor defines a minimum and maximum amount of instalment that he can afford to invest.
'Smart SIP’ books profits as a part of the existing equity units when markets are very expensive. The sale proceeds and monthly instalments are invested in liquid schemes.
Here are the key things to keep in mind while investing in 'Smart SIP':
1.Just like in fixed value SIP, continuity of these investments is important to ensure that the investor invests across various market cycles to gain the most optimum advantage of this cost-averaging tool
2.It is most important that an investor decides the maximum amount that he/she can afford to invest over a medium-term and defines the limit accordingly to gain the maximum advantage of a Smart SIP.
3.It is also important to understand the logic used behind the 'Smart SIP' and choose wisely amongst the various such options available with various mutual funds.