Over the last few years many people have realized the benefits of investing in Mutual Funds. One of those benefits is the systematic way of investing with monthly amount as low as Rs. 500 to achieve their financial goals.
Systematic Investment Plan (SIP) is a disciplined and automated way of making investments in Mutual Funds at regular pre-specified intervals. All one has to do is select a scheme, set a regular investment amount, choose a date of monthly instalment and set the investment tenure. The fund house then automatically deducts the payment regularly and invests in the scheme of your choice.
There is no doubt that SIP is a convenient way of investing in Mutual Funds. However, many investors now are switching to innovative ways of investing in mutual funds to generate better returns and achieve their goals by accumulating wealth faster.
RankMF introduced a new innovative way of investing in Mutual Funds called the SmartSIP.
SmartSIP is an intuitive way of investing where investor’s money is invested based on prevalent market conditions with the aim to generate alpha as compared to regular SIP.
As you know that you can earn quality returns from the market if you follow – buy low & sell high principle. Investing in SIP does not give you this advantage but SmartSIP follows this principle to make investments either in equity schemes and in low risk liquid schemes based on the signals generated by considering the Margin of Safety Index (MosDex – A RankMF proprietary valuation method). All of this happens automatically through our preset algorithm with the help of the MosDex score levels and without any human intervention.
The Margin of Safety Index helps determine whether the time to invest in a particular fund is right or not. The scheme NAV is used as a reference point to compare if the margin of safety is high or low. If the markets are expensive, the Margin of Safety (MosDex) value is low and if the markets are cheap, the Margin of Safety value is high. The values of the MosDex ranges from 0 – 200, 100 being the average level of margin of safety.
Watch this video to understand the basics and how SmartSIP works:
Let’s see in details why SmartSIP is a smarter way of investing in mutual funds:
| S. No. | Particulars | SIP | RankMF SmartSIP |
| 1 | Investment Order Type | Traditional approach to mutual fund investing. It invests fixed amount at regular interval irrespective of market conditions. | New-age smart investment approach. It is a two legged order type which smartly switches investments between equity mutual fund and low risk liquid fund based on market conditions. |
| 2 | Timing the market intelligently using MosDex score | No! SIP follows the buy & hold principle & does not consider MosDex score for investing. SIP continues to invest your instalment amount irrespective of change in NAV. | Yes! SmartSIP intelligently applies the buy low and sell high principle using Margin of Safety Index based on NAV to generate superior returns. |
| 3 | Comparative Risk | Moderate to high risk as it continues to buy equity mutual fund units even when the markets are overvalued. | Comparatively lower risk than a SIP because when markets are overvalued it parks investment in low risk liquid fund to avoid buying equity fund units at an expensive price. |
| 4 | Returns | Moderate to high returns | Generates higher returns as it partially sells equity units and books profit when markets are overvalued & parks investment in liquid funds to later re-invests in equity fund when markets are reasonably valued. |
| 5 | Realisable corpus | Reasonable corpus value | SmartSIP plus variant capitalises on undervalued market conditions when NAV are low by investing double the instalment value. Hence the realisable value of invested corpus is much higher as compared to corpus value of the SIP investments. |
This way SmartSIP makes sure you make the most of the market volatility and generate superior returns that your SIP investments. With SmartSIP the same disciplined investing approach of investing can help you achieve your financial goals faster.
The author has done a Bachelors in Banking and Insurance (BBI). She is a budding financial content writer. Her strength lies in simplifying financial jargons. Her goal is to help readers make better investment decisions., SmartSwitch | Last Update 15 February 2021
