Staggering equity MF investments through systematic transfer plans

economictimes.indiatimes.com:

volatility in equities likely to be high, money managers believe investors should stagger their investments into equity mutual fund schemes. Fund houses offer various options for staggered investments such as a daily, weekly or monthly systematic transfer plan (STP) from a debt-oriented scheme like a liquid fund or ultra-shortterm fund to the chosen equity fund.

WHEN SHOULD AN INVESTOR OPT FOR A SYSTEMATIC TRANSFER PLAN (STP)? Investors who believe that the long-term earnings growth story is intact, but fear high volatility in the markets due to events such as elections or valuations being slightly ahead of fundamentals can use STPs. Typically such investors have lump sum money and want to invest in equity mutual funds, but in a staggered manner, and simultaneously earn a small return by investing in liquid/ultra short-term schemes.

HOW DOES IT WORK? An investor looking to invest say Rs 1 lakh into an equity fund using STP will have to first choose the liquid or ultra-short-term fund and make an investment there. Once that is done, choose an equity scheme and decide on the amount to be transferred along with the frequency of transfer and set up the STP. Both the source and the destination schemes should be from the same fund house. Most fund houses have a daily, weekly or monthly option to transfer money. For example, an investor can decide to transfer Rs 2,500 every week to an equity fund or even something like Rs 10,000 every month. Mutual fund investment portals too allow you to set these up entirely online.

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