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Invest Lump sum Or Start STP In Mutual funds:


Ramesh is looking to invest Rs.5 Lakh in mutual funds.

Now he has two options.One is to invest lump sum in equity fund and other is to start STP – systematic transfer plan i.e.invest lump sum in liquid fund & transfer fixed amount monthly in equity funds.

Here we have tried for historical reference of last decade about lump sum & systematic transfer.

Schemes selected:

  • Equity fund: DSP Blackrock balanced fund
  • Transferor scheme: DSP black rock short term fund.
  • Monthly transfer amount: Rs.3000/-
  • Period of STP : Last 10 Yrs.
  • Total amount transferred in balanced fund:Rs. 3,60,000
Fund Amount Invested Current value as on 15-04-2016
DSP Blackrock  short term 5,00,000 5,08,532
DSP Blackrock Balanced fund 3,60,000 6,76,000
total 11,84,532

 

If invested lumpsum in Balanced fund:

Fund Amount Invested as on 15-04-2006 Current value as on 15-04-2016
DSP Blackrock Balanced Fund Rs.5 Lakh Rs.15,75,076

Summarizing:

  1. Current total value through STP:11,84,532
  2. Current value if invested lump sum: Rs.15,75,076

Concluding

  1. For last decade,Current valuation is higher if invested lump sum.
  2. SIP / STP returns will depend on volatility.SIP / STPs can provide relief if there is volatility.
  3. Past report is just for reference.Result can be different if different period is selected.
  4. If investor is conservative then go for STP otherwise lump sum investment is better s.t. period of investment is long term.
  5. Through STP, capital protection is possible but it can compromise the returns.

Category: Mutual Funds

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Information provided on this blog is for general purpose only & not investment advice.Please take advice of SEBI Registered Investment Advisors before taking any investment decision.
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