Which category of debt fund should I choose to set up an STP?
Dhirendra Kumar discusses the viable debt fund options for setting up an STP
Jun 7, 2019
In the current scenario, which category of debt fund should be ideal to set up a systematic transfer plan (STP) into an equity fund. My investment horizon is five to 10 years.
You should not look beyond a liquid or an ultra short-duration fund. The primary idea of doing an STP from a fixed income fund to an equity fund is to ensure that you do not end up investing a large sum of money at one go. A lump-sum investment in an all-equity fund may create a lot of anxiety. You also run the risk of catching a market high. So, averaging your investments while the other portion of your money is put in a fund simultaneously earning around seven to eight per cent return is a good proposition. You should not look for the best fund, as both liquid and ultra short-duration fund categories do not have a wide range of performance. Choosing an average fund instead of a best-performing one in these categories won't make a huge difference to your life.