Jul 18, 2017 3 min read

Afraid of Losing a Lumpsum? Start STP to Fetch Returns

Know how you can manage your finances with the help of STP without compromising on the risk parameters.
As per the data of AMFI, it has been analysed that the inflows in the equity mutual funds have raised to Rs.10,790 crore in the month of May which is an amazing boom in the industry. The entire credit for the rising inflows goes to the market performance, especially of the domestic companies post demonetisation. However, we know that it is just impossible to predict the fall or rise of the market and thus, the debt funds are considered to be the safest.

People often invest in the equity-oriented plans in order to attain growth and appreciation in the capital. Due to market volatility, it becomes quite difficult for some to survive longer and they just redeem their invested money to feel safe. But, do you think it is the right way? Investment has to be done through proper planning either you opt for the equities or debts. If you don’t have high risk-bearing capacity, then a high-yielding equity plan cannot help you. Thus, you need to opt for the plan that suits you.

On the flip side, lumpsum is often considered a better option to gain good growth on the investments. But you might be afraid of losing the same all at once. For that, the STP is what you should opt for. Yes, the systematic transfer plan is the one that will provide you the best way of gaining advantage of the prevailing market opportunities.

How to Start STP?

STP (Systematic Transfer Plan) is a method which allows you to invest a lumpsum amount in the debt investment plan which is further transferred in some other scheme via instalments.

Suppose you want to invest in an equity mutual fund but you don’t want to go for it in one shot. You can invest a lump sum amount in the liquid mutual fund, which is the safest investment plan providing more than a simple interest. Then, by opting for the STP, your amount can be transferred from this liquid fund to any equity plan of the same fund house. This way, your lumpsum investment is managed to produce exceptional profits in the long run.

Since markets are volatile, with STP you can distribute the purchases over a period of time at different market levels. Accordingly, the average price per unit of the scheme is probably lower than the purchase price of the lumpsum investment. In this way, you can easily secure your portfolio’s worth from suffering a sudden fall even when the markets suffer big losses. Moreover, you have more number of units to your portfolio that will return you big income.

What is the Benefit of STP?

As the features of STP are somewhat same as the SIP investment plans, the benefits that it offers to the investors are also of the similar nature. The major advantages include:

  • The Power of Compounding 
    With this, one becomes capable of earning returns at a compound rate through which one gets interest on interest and create a huge capital.
  • Tactical Asset Allocation & Rebalancing
    It allows you to stay invested in the liquid funds today, and invests in the equity mutual fund gradually to meet your financial requirements. Further, if you expect that the market can go to corrective stage in the future and want to disinvest your money from the equity funds, then STP to a liquid plan or a ultra short term funds would be a better tool.
  • Help to Plan Finances
    One can plan the financial goals with the help of STP as it provides security and management of the fund to a great extent. It lets you shift gradually towards equity to get you nearer to your financial goals.

So if you have the concern that a lumpsum investment in equity can cause you losses, the STP is what you can opt for your long-term financial goals. MySIPonline has a variety of schemes from different AMCs which provide the STP facility to the investors. You must get in touch with us to make your financial plan more efficiently.