SIP sahi hai, but this strategy will beat SIP returns

Summary: Think SIPs are the only smart way to invest? A lesser-known strategy could actually deliver better returns — without taking on extra risk. If you're parking your money in your bank account and then investing monthly, this article might just change how you invest forever.

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When we talk about disciplined investing, SIPs (Systematic Investment Plans) are often the default choice. And for good reason. They help you stay consistent, invest through market ups and downs and take the emotion out of timing.

But what if we told you there’s another option that could quietly outpace SIPs in returns, without taking on more risk?

Enter the lesser-known but highly effective STP, short for Systematic Transfer Plan.

What’s an STP?

An STP allows you to park a lump sum in a low-risk fund (we suggest a liquid or an ultra-short-duration debt fund) and transfer a fixed amount periodically into an equity fund of your choice.

Why STP can outshine SIP

In an STP, your lump sum doesn’t just sit idle. It earns around 6-7 per cent per annum in the liquid fund while it waits to be deployed in equity.

That’s a quiet tailwind. Over time, this extra boost can add up to a meaningful difference.

Let’s take an example:

• Assume you have Rs 5 lakh to invest.
• Option 1: Put it in a bank account and do a monthly SIP of Rs 25,000 into an equity fund.
• Option 2: Put the Rs 5 lakh in a liquid fund and set up an STP of Rs 25,000/month.

The second option (STP) earns you more money. How? While you stagger your entry into equities, your lump sum remains invested in a liquid fund earning 6.5–7 per cent annually. In contrast, money lying in a savings account — like those in major banks such as HDFC Bank — earns just 2.75 per cent. That difference quietly adds up over time, giving STPs a slight edge over traditional SIPs.

STP has a couple of limitations, though

STPs come with a few conditions. For one, you can only set up an STP between two funds within the same mutual fund house. So, if you're planning to invest in, say, Parag Parikh Flexi Cap, your source fund also has to be a Parag Parikh debt scheme.

Also, remember that while savings accounts offer tax exemption on interest up to Rs 10,000 a year (under Section 80TTA), the returns from liquid funds don’t enjoy this benefit. But even after accounting for taxes, the net returns from STPs are often higher than simply leaving your money in the bank.

When is STP a smart choice?

• You’ve received a bonus, inheritance or sold a property, and don’t want to invest the entire amount in equity in one shot.
• You want to average into the market, but don’t want your idle money earning just 3–4 per cent in savings accounts.
• You are nervous about timing, and want a plan that feels safer than going all-in.

The ideal way to do STP

• Park your windfall or a lump sum in a liquid fund.
• Transfer regularly into a diversified equity fund aligned with your goal and risk appetite.

And yes, make sure both funds belong to the same fund house for STP to work smoothly.

Want to invest smarter and maximise your returns?

At Value Research Fund Advisor, we don’t just recommend the best funds — we help you build a plan that fits your goals, timeline and risk appetite. Whether you’re starting a SIP or planning an STP, our personalised insights ensure your money is always working smarter.

See your top fund picks now and get a portfolio strategy that works for you — only at Value Research Fund Advisor.

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Also read: Forget SIP, STP can earn you more money

This article was originally published on July 10, 2025.