Invest lumpsum through systematic transfer plans

financialexpress.com:

As volatility in markets likely to be high because of geopolitical tensions, investors with lumpsum should consider systematic transfer plans (STPs) in mutual funds for higher returns. They can stagger investments from a debt-oriented scheme like a liquid fund to an equity fund with the same fund house.

Such a strategy will enable a disciplined and planned transfer of a fixed amount between two mutual fund schemes and can help to mitigate the impact of any market volatility. As the money is automatically adjusted between the selected funds, investors can de-risk the market timing and benefit from the power of compounding.

In fact, STPs help in averaging out the investment purchase price and are extremely beneficial in volatile periods when markets are highly uncertain. Moreover, as the objective of a debt fund is to beat the savings interest rate, any outperformance will provide superior STP returns.

Dhaval Kapadia, head of products, Ambit Wealth, says it may be advisable for investors with lumpsum to stagger investments into equity markets via STPs over the next six to nine months. “In this way, investors would be able to take advantage of any interim volatility or corrections in the market and average their cost of investment. And as markets recover post the culmination of these events, investors would stand to make better returns.”

Similarly, Harshad Chetanwala, co-founder, MyWealthGrowth. com, says during uncertain times it is better to follow a staggered manner as it could help an investor in taking advantage of volatility in the stock market.  “Investing in one go at this stage is not advisable. However, one can look at 30 to 40% of investment in lump sum and the rest can be invested through STP mode.

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