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Here we have tried for historical reference of last decade about lump sum & systematic transfer.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:
- Current total value through STP:11,84,532
- Current value if invested lump sum: Rs.15,75,076
Concluding
- For last decade,Current valuation is higher if invested lump sum.
- SIP / STP returns will depend on volatility.SIP / STPs can provide relief if there is volatility.
- Past report is just for reference.Result can be different if different period is selected.
- If investor is conservative then go for STP otherwise lump sum investment is better s.t. period of investment is long term.
- Through STP, capital protection is possible but it can compromise the returns.
