Which debt fund would you recommend for a weekly STP into an equity fund?
Answer transcript: It doesn't matter. The primary goal of an STP is to average your investment in equity. You want to eliminate the possibility of catching an equity market high. Let's assume you have Rs 50 lakh which you want to spread over the next year and you want to do a weekly STP which means about 1 lakh moving into a weekly STP. Whether this money earns 7.5% or 8% it is not going to make a meaningful difference but the eliminating possibility of catching an equity market high is going to be meaningful. Equity market volatility is a very different kind of risk. The primarily objective is to reduce the risk of catching an equity market high, the choice of liquid or ultra short term bond funds, does not make a difference.
This article was originally published on June 13, 2017.
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