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From Equity to Equity

Systematic Transfer Plan is suggested when an investor has lump sum to invest in ...

I want to exit FT Flexi Cap fund, in which I have been invested for over five years, and invest in Templeton India Equity Income. Since they are both Equity Funds, does it make sense to do a STP or will a lump sum investment do?
-Madhu Vishwanath

Whenever you have a lump-sum to invest, it’s best to invest it gradually through an SIP or STP. However, in your case, you can withdraw your investments from FT Flexi Cap fund and invest the amount received as a lump sum in Templeton India Equity Income fund. Since the former is an equity fund, your investments have already been exposed to volatility of equity markets.

Systematic Transfer Plan (STP) is suggested when an investor has lump sum to invest in equity as that reduces susceptibility to market conditions. Investing small amounts regularly helps average costs over time and you can benefit from volatility.

Sometimes, lump sum investments in an equity fund can discourage an investor if the markets fall soon after investing. One may pull out in such a scenario. STP averages the entry price.



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