STP- Systematic Transfer Plan

When in doubt- Do STP to average out your lumpsum investments.


SIP is what we all know is  Systematic Investment Plan which is probably the best way to invest in mutual funds by way of regular, fixed investment every month. However, at times we do have lumpsum money but it does not fit in the monthly scheme of things.

 We should take the STP ( Systematic Transfer Plan) route in such scenario where the Lumpsum money is staggered over a period of time so that it can somewhat work like an SIP if not exactly SIP. STP can be done daily, monthly, weekly or fortnightly as per the market and as per the future expectation of the market so as to average out our investments to the best possible manner.
The modus operandi of STP happens by putting the lumpsum money in the liquid fund of a particular fund house and then slowly allocating it towards the destination fund which might be an equity mutual funds as per the risk appetite of the client and the time horizon. This way we can average out our investments and also generate decent returns.
However there in no fixed formula to do investments as nobody can predict the market but we can follow this route to our advantage. And lastly the underlining factor is that mutual fund investment is subject to market risk so one needs to do it under proper advice of an advisor who has good knowledge of the market.
Srinivas Jha

Comments

  1. Unknown3 October 2019 at 05:18

    When in doubt do STP and gain from averaging. Good article.

    ReplyDelete

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