This is a blessing for investors, looking to invest lump sum with an inclination towards the equity market but want to hedge against the risk of sudden fall in prices. In ana STP, your lump sum funds are invested in a debt/equity fund or a low risk fund and are moved systematically to a riskier fund with an aim to achieve wealth creation.
This helps investors deploy their funds into equity while earning returns on their debt fund investments. This is better than investing in equity through SIP by keeping your funds in a bank.
While better returns can be earned by investing the lump sum amount into equity, the underlying risk to capital is high. This is where a STP scores its benefit.
Reasons STP can benefit you in ways more than one:
- It helps you diversify your portfolio by letting you transfer a part of your investment to a different scheme
- You can earn more in the same period from investments in two Mutual Fund schemes
- It removes the need for repeated redemption and investment transactions
To start an STP, all you need to do is select the scheme you wish to transfer money from and the scheme you wish to make the transfer to, the frequency at which you want to make the transfer and the amount you want to transfer each time. You can then relax considering the transfer process will automate till the date specified by you or till the folio balance exists, whichever is earlier.
Note: Transfers from your investments under this facility may be subject to Exit Load as applicable
This article should not be considered as 'investment advice'. We request the Reader to make informed investment decisions and consult their financial advisors to determine the financial implications with respect to investing in Mutual Funds.