Personal Finance Blog India –

Looking To Invest Lumpsum Amount – Systematic Transfer Plan STP Is The Best Way

We always get striked by the question: Looking to invest lumpsum 2 L & what is the possible best way?

If any one is looking for long term say around 15 years then systematic transfer plan from mutual funds is one of the best way of investing.

Why STP & Not SIP:

In STP we first invest the lumpsum amount in liquid fund of the said AMC & then systematically transfers the money from liquid fund to equity fund / debt fund.

If you have some good cash in saving account then STP should be preferred over SIP as chances are quite high that liquid funds will offer better than saving account & second very important thing is that all money will get utilized for investment purpose.If this amount is in saving account then one may get tempted to replace older TV by plasma,LCD or LED or money may find its way for different purposes.

STP Strategies:

In general following strategies can be followed in systematic transfer plan

  1. Fixed capital transfer :  Fixed capital ..say Rs 3000/- per month or per quarter Or Rs.250/- per day will be transferred from liquid fund to equity fund.Few AMCs offer daily STP facilities.
  2. Dividend transfer:Transfer only dividend received from liquid fund & maintain the balancing amount in liquid fund.
  3. Transfer only capital appreciation: Transfer only capital appreciation in equity fund.It will conserve principal amount in the liquid fund.
  4. Strategy 1 is the most preferred & aggressive.Strategy 2 &3 are for higher amounts & relatively conservative investors.

While doing STP just remember one thing – Always make STP from Liquid funds & Avoid making STP from debt funds to equity funds.As their is always exit load on debt funds which can adversely affect the overall returns.

As a bottomline I always find STP as the best investment option subject to term is longer.From STP strategies stated above first strategy which is similar to SIP is the best…what do you think about it?

Reference Reading:

Illustration Of Systematic Transfer plan from Reliance Liquid Fund To Reliance Growth Fund

Category: Mutual Funds


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