I have some lump sum amount to invest. Do you think an STP from debt to equity is better than SIP? Please suggest two-three funds where I can start STP from Debt to Equity?
- Sumit Nandy
A Systematic Transfer Plan (STP) is the most suitable route to park big investments. We suggest an STP over lump sum investment as it reduces the possibility of catching any market peaks. For instance, if you invest in a high phase of markets and make abnormally huge returns, you would be tempted to invest in the same manner again. Your next investment may not be able to fetch as much returns or may just plunge because of markets or other factors. Following an STP also inculcates a belief in disciplined investing.
To go about an STP transfer, firstly you should deposit your money in a debt or liquid fund. Next you need to instruct the concerned fund house to transfer say Rs 1,000 monthly or quarterly from the debt fund to the chosen equity scheme. An STP is almost like an SIP into another fund, the only difference being that money is transferred from one fund to another, instead of going from your bank account. You can choose any liquid fund to start an STP, but the choice of equity fund will depend on your risk appetite.