Should I do daily STP? | Value Research The basic idea behind staggering your investment over a period of time is to rule out the possibility of committing the entire corpus at a market peak
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Should I do daily STP?

The basic idea behind staggering your investment over a period of time is to rule out the possibility of committing the entire corpus at a market peak

What is the best frequency of doing STP - daily, weekly or monthly? Which will give more averaging?
- R N P Singh

The basic idea behind staggering your investment over a period is to rule out the possibility of committing the entire corpus at a market peak. This method will also help investors to average their purchase cost and maximise their returns over a long period. An investor with a modest corpus of a couple of lakhs is better off with a monthly STP, as it would serve his purpose of investing the fund over a period of time. In fact, many investors would find daily or weekly STPs cumbersome, as so many purchases in a month or week would make it difficult for them to track their investments. Even calculating capital gains tax becomes an arduous task.

However, a person with a very large corpus can consider daily or weekly options, as it will help him to deploy his funds without too much delay.

Which method would bring down the average purchase cost the most would depend on the conditions of the market and the period under consideration. However, our past studies show that the frequency of systematic investments does not really make a significant difference to returns over a long period of time.


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