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Rank MF, the mutual fund research and investment platform of discount broking firm Samco Securities, has launched Smart SIP and Smart SIP Plus, a new variety of systematic investment in mutual funds.
Traditional systematic investment plans (SIPs) involve investing a fixed amount of money in a mutual fund scheme on a particular date of every month irrespective of the market valuations. In contrast, Smart SIP lets investors park their money in liquid schemes when equity markets are expensive and route it back when they turn cheap.
The entire process of churning between equity and liquid schemes is automated based on the Margin of Safety Index (MosDex) developed by Rank MF. The values of the MosDex range between zero and 200 with 100 being the average level of safety. The equity market is considered expensive when the index value goes below 100.
When the equity market becomes cheap on a particular SIP mandated date, 35 per cent of liquid fund investment will be automatically diluted and invested in equity. By opting for Smart SIP Plus, investors can double their SIP contribution when the equity market is cheap.
Market-dependent
The Smart SIP is now available in 350 schemes. While investors can select any equity scheme for Smart SIP, the investment in liquid scheme when equity markets are high will be made only in ICICI Pru Liquid Fund as the minimum investment ticket is low at ₹100, said Omkeshwar Singh, Head, Rank MF.
For instance, an investment of ₹10,000 made through the conventional SIP for six years would fetch ₹8.71 lakh at 14.65 per cent return, while it will be ₹9.85 lakh through Smart SIP and ₹11.1 lakh through Smart SIP Plus with a rate of return of 19.71 per cent and 20.83 per cent, respectively.
Rank MF targets its assets under management to touch ₹50,000 crore by 2025 from ₹100 crore currently. While Smart SIP is being offered free for now, Rank MF plans to levy a charge at a later stage. Currently, it earns a commission from mutual funds and plans to launch a similar facility for direct plan for a fee.
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