SIP v/s Smart SIP: To get higher mutual fund returns, this is what you should do

Mutual funds are regarded as an ideal investment tool for investors looking to generate wealth in the long run. Compared to most conventional investment options available in the market today, such as fixed deposits and savings accounts, mutual funds have the potential of drawing decent returns. They can also help you save on tax and offer a reasonable amount of flexibility.

If you are new to the world of mutual funds, financial advisors recommend investing via Systematic Investment Plans (SIPs).

In this article, we compare regular SIPs in mutual fund with Smart SIPs to decide the better option for enhanced returns.

Understanding SIPs

When you invest in mutual fundsvia a regular SIP, you get to invest at various levels of the market cycle. Irrespective of the market situation, a regular SIP continues to invest your money in selected funds of your choice for a pre-decided period.

If you have activated the auto-debit facility, the money gets debited from your bank account every month. Many investors are uncomfortable continuing with their ongoing SIPs when markets become volatile. Some invest occasionally, or some others may stop investing, altogether waiting for markets to get better.

Smart SIPs to the rescue

To help investors tackle such concerns, mutual fund houses and other investment platforms introduced the concept of Smart SIPs. Under Smart SIP, the risk status of a scheme is measured through its NAV. Also, various other parameters are set to determine its value. If the margin of safety is high, a smart SIP invests your funds in equity investments. However, if the margin of safety is low, a Smart SIP does not make any fresh equity investments. It may then invest in safe options such as liquid funds until the market gets better.

In other words, when markets are reasonably priced, a Smart SIP invests your money in equity funds. When markets are undervalued, it doubles your monthly SIP amount to get you higher returns in the long run. Conversely, in the bull market, a Smart SIP books profits or sells a part of your existing equity investment to transfer the gains in liquid schemes.

A steady investment through Smart SIPs for a while can ensure a large corpus and meet your financial goals quickly. By adjusting the monthly SIP flow based on market fluctuations, it can help you make the most of your investments. However, Smart SIPs are only recommended for investors who have sufficient liquidity at all times since the modified SIP amount can be unpredictable.


To summarise, Smart SIP investments can help you create a substantial corpus by adjusting the monthly SIP flow based on market fluctuations. If market risksare high, a Smart SIP option can invest in safe alternatives. Conversely, when market risksare low, you get the option of entering high-return equity funds. If you are new to mutual fund investments, you can read more on what is a mutual fund and how to invest in SIP to enjoy enhanced benefits of investing.

Paul Petersen

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