know best investment options at record market high systematic transfer plan stp better option to investment in equity fund

Have a fund to invest in, but market valuations seem high? Systematic Transfer Plan (STP) can solve your worries

If you have lump sum fund then it would be better to invest it through STP.

Investment Tips | STP: Due to the rise in stocks, there are many investors who prefer to stay away from the market. There are many such stocks which have reached a record high of 52 weeks, so investors are confused about where to invest their capital. There is a fear of profit booking on investment in them. Systematic Transfer Plan (STP) is a better option for such investors. Under this, many of the invested capital is invested from debt funds to equity funds.

STP is similar to Systematic Investment Plan (SIP) in which a fixed amount is invested in a mutual fund from a bank account on a regular basis on a fixed date. STP is a type of SIP that is done from one mutual fund to another mutual fund.

Alert! Complete this work by tomorrow, otherwise the demat-trading account will be closed, these things will change from August 1

Understand STP like this

  • If you have 1 lakh rupees and you want to invest it in the market, then it has to be invested in debt funds first. For this, ultra short term, low duration and liquid funds of debt funds are better options.
  • While taking this plan, it is to be decided that how much amount will be invested in equity every month. As you have decided that 5 thousand rupees will be invested in equity funds every month.
  • After one month, your debt fund will be left with Rs 95 thousand and the remaining Rs 5000 will be invested in equity fund. Similarly, every month money will be deducted from debt funds and investment in equity funds will increase.
  • Gradually, over 20 months, your entire money will go into equity funds.
  • During these 20 months, the amount lying in the debt fund will continue to generate a fixed income.

FD: To stay away from the volatility of the stock market, then get more than 7% interest on FD in these banks

These are the advantages of investing in STP

  • STP can be done between two mutual funds of one fund house (AMC).
  • The biggest advantage of STP is that the market timing risk is reduced in it.
  • It is better to invest the lump sum amount in STP than in SIP as it is always considered better to invest the lumpsum amount at the lowest price and it is impossible to estimate whether the current price is less or more than the future price.
  • In STP, the money remains in liquid or short term funds till it is transferred to equity funds. Returns are also available on the capital invested in liquid or short term funds.

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Nisha Chawla
She is an expert in Banking, Finance and working with an international bank. She sharing her ideas and knowledge with Business Khabar.
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