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Tata Capital > Blog > Wealth Services > What is Smart SIP? Smart SIP Vs Normal SIP

Wealth Services

What is Smart SIP? Smart SIP Vs Normal SIP

What is Smart SIP? Smart SIP Vs Normal SIP

The AI revolution has transformed the way the world operates. From customer service and retail to marketing, lifestyle, and logistics, AI has become a highly disruptive power in various sectors – and financial investments are no different.

For so long, SIP has been the preferred choice for most new investors to begin their investment journey. They contribute a fixed amount of money to a mutual fund scheme regularly and enjoy consistent returns in the long run.

However, a new branch of SIP investment is now here that leverages AI technology and data analytics to drive the investment process. But what is Smart SIP, and how does it differentiate from the Normal SIP investment?

Let’s find out.

What is Normal SIP?

Normal SIP or regular SIP is the traditional way of SIP investing that requires the investor to invest a fixed amount of funds at regular intervals into their choice of mutual fund scheme. This gives you the flexibility to plan your investment and build a habit of investing regularly.

You are allocated some units of the mutual fund based on its NAV, and with every investment, you can keep adding more units to the scheme to generate better returns.

What is Smart SIP?

A smart SIP is a type of SIP investment strategy that employs data analytics and elements of AI in the investment process. It analyses historical fund performance data, market trends, and economic indicators to dynamically adjust the amount and frequency of your investment based on market fluctuations.

This way, smart SIP aims to maximise your returns by capitalising on the market opportunities and mitigating risks more effectively.

Smart SIP works on the principle of Buy Low and Sell High. When the market prices are fairly valued, your SIP investment in equity funds will increase. Similarly, when the market is inflated, the strategy will invest only a small portion of SIP investment in equity funds and more in debt funds to minimise its overall risk.

Features of Smart SIP

1. Smart SIP relies on a dynamic asset allocation strategy to switch between equity and debt fund schemes to maximise returns and minimise risk.

2. The SIP strategy is personalised based on your investment goals and risk tolerance. It also allows you to define the minimum and maximum amounts of SIP investment.

3. Since it employs advanced AI and machine learning technologies to analyse the market, investment decisions are highly data-driven, which enhances their accuracy.

Smart SIP vs Normal SIP

Add the below content in table format.

DifferenceSmart SIPNormal SIP
Investment strategySmart SIP dynamically adjust investment allocations and frequency based on the market conditions.Regular SIP invests a fixed amount in a mutual fund scheme at regular intervals. The investments are consistent throughout the investment period.
Investment amountThe investment amount can be adjusted to buy and sell units per the investment strategy.A fixed amount is invested.
Customisation abilitiesSmart SIP offers great flexibility to investors to customise their investment strategy based on their financial goals, risk appetite, and market outlook.They may lack the customisation features available in smart SIP.
Risk managementSmart SIP uses advanced risk management techniques, such as downside protection and portfolio rebalancing, to reduce investment risk.Normal SIP does not employ any risk management strategies but relies on the steady accumulation of assets over time.
Costs involvedInvestors might incur higher investment costs to manage smart SIP funds.Normal SIP involves a lower investment and management cost.
Technology integrationSmart SIP uses advanced technology such as AI, machine learning, and data analytics to understand the market and identify the best investment opportunities.Normal SIP does not employ any such technology to understand market trends.

In Conclusion

Both smart and normal SIPs have their unique advantages, and the choice between the two depends on your financial goals, investment horizon, and risk tolerance. Ultimately, both these investment strategies aim to help you invest regularly and grow your wealth for a financially secure future.

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