Should you opt for smart SIPs? | Value Research If you have an investible corpus that you wish to invest in the equity market, here is the right way to do so
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Should you opt for smart SIPs?

If you have an investible corpus that you wish to invest in the equity market, here is the right way to do so

Since time immemorable Value Research has been the strong advocator of investing systematically in the equity market so as to avoid capturing the markets at a high. Thus, we suggest investing a small amount every month through SIPs in equity mutual funds.

For investors who already have a considerable investment corpus in hand, you should park that money in a liquid fund and slowly transfer the same to equity funds via a systematic transfer plan (STP). STP is similar to SIPs just that instead of the money being debited from your bank account (as in case of an SIP), a corpus is parked in liquid funds and the money is slowly moved to equity mutual funds on the said frequency (weekly, fortnightly, monthly, etc.).

Several fund houses have come up with innovations bringing some twist to the SIP story in order to make it smarter or more sophisticated, and smart SIP is one of them. In smart SIP, the amount of money that gets invested in equity every month is somewhat linked to the level of the markets. If the markets are considered to be in a bear phase or cheap, more amount moves into the equity funds and when the markets are expensive, lesser amount gets invested. The process is driven by an algorithm that determines whether the markets are expensive or cheap on several parameters.

While this looks like a more lucrative feature, it is contradictory to the idea of SIPs. The very idea of SIPs is to avoid timing the market and keep investing irrespective of the market conditions. However, the irony is that with all these innovations that are mounted on top of SIPs, all of them have an element of timing the market which is precisely the devil that an SIP is originally supposed to be an antidote to. You should shun all the noise around such innovations as these are nothing more than marketing gimmicks.

Remember, it is not these innovations that help you create wealth, it is your discipline and patience. Moreover, do ensure to increase your SIP amounts periodically, with an increase in your income.

Suggested read: The power of compounding


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