VR Logo

When would it be a good time to start STP in equity funds?

Ashutosh Gupta suggests a robust way of investing for all types of market conditions

I have invested in liquid funds. When would be a good time for me to start STP in equity funds? I have been waiting for the market to come down before starting the STP.
- Irene Dsouza

I would suggest that she should go right ahead with her STP, because the STP itself is a hedge against the possibility of a market fall. That is because equity markets are fairly unpredictable. If from here on the markets start falling, after she starts her STP, then it will only work to her advantage because she would be accumulating units at lower market levels. But on the flip side, if the markets keep going up and she continues to wait on the sidelines then it will be a cause of great opportunity loss and it will bring its own stresses upon her.

As I was saying, markets are fairly unpredictable and these points of inflection come in the market when people least expect them and for the reasons which nobody could have anticipated. For instance, look back at the great market fall of 2008 or even last year for that matter. Nobody saw them coming. Barely anybody could pre-empt them. And that is why it is futile to wait for those points of inflection because you don't know when they would come. Markets can keep going up in a sustained way for a fairly long time despite the overhang of concerns of valuations.

So I would say, having time at hand and investing systematically would ensure reasonable returns out of her equity mutual fund investments, irrespective of the level of markets where she starts investing from.

Post Your Query