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11 Aug 2022
Systematic Investment Plans are generally considered a great tool to inculcate a discipline in investing! What if it can be made smart as well?
Wondering how an SIP can be made smart? Let’s understand right away!
A regular or normal SIP invests a fixed sum at a pre-decided date irrespective of the valuation at that time. A smart SIP, on the other hand, takes into account the valuation and increases or decreases the base amount selected by the investor.
So, for instance, if your SIP amount is ₹10,000 per month for 24 months, a normal SIP will invest ₹2,40,000 over the course of two years.
A smart SIP, on the other hand, invests based on different market scenarios.
So, for instance, for a base Smart SIP amount of ₹10,000, it will invest that same amount or ₹10,000 when the valuations are neutral.
When valuations are expensive, the amount for investment will come down by half to ₹5,000. However, in case of a correction, and subsequently valuations becoming cheap, the smart SIP will invest a higher amount, that is the double of your base amount – ₹20,000.
The Smart SIP instalment amount(s) becoming double or half, though, is an example, and investors themselves can decide what is the maximum and minimum that they want to invest when valuations fluctuate.
How are these valuations decided?
The valuations are decided based on the percentage of Net Equity Allocation (equity and equity-related securities net of hedged positions using derivatives) of Kotak Balanced Advantage Fund (“KBAF”).
The core of this smart SIP is that the amount of your investment is higher when valuations are cheaper and vice-versa.
So dear investors, you can try the smart SIP now!
The investment details/illustration are for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital. Kotak Mahindra Asset Management Company Limited is not guaranteeing or promising any returns. Smart SIP does not guarantee any profit/loss in declining/upward markets. Actual returns may vary. The terms cheap/neutral/expensive are used to explain the various market scenarios. Investors may, before making any decision, consult their financial expert to know if the same is suitable for them. Please visit here to know more in detail about the Smart Facility.
