Forget SIP. STP can make you more money!

This is true if…

You have a pot of cash in hand you are looking to invest

Don’t invest in one go because…

- You can erringly invest in a market high - You don’t get the benefit of rupee cost averaging (buy more when markets are cheap and vice versa)

Is there a better solution?

Yes, spread your investment over 12 to 36 months, depending on the size of the corpus and its significance.

SIP and STP

These are the two options for you to spread your investments.

What is SIP

SIP (systematic investment plan) allows you to transfer your money from a bank account to a mutual fund

What is STP

STP (systematic transfer plan) allows you to move money from one fund to another.

Start STP via liquid fund or ultra-short duration fund

These funds are similar to savings accounts but offer higher rates. They can earn more than the SIP + savings account combo.

For instance

Savings accounts of reputed banks offer 3-3.5% interest. In comparison, liquid and ultra-short duration funds generated between 6.5 and 7% last year.

Example

Assume you put Rs 5 lakh in 2023 in an average flexi-cap fund in 2023 through a) an SIP via savings a/c and b) an STP via liquid fund, you’d earn: SIP: Rs 5.8L STP: Rs 5.89L

Our take

Have lumpsum money? Put the money in a liquid/ultra-short duration fund. Then, start an STP to an equity fund. This way, you’ll spread your investments and earn more.

Thanks for Reading!