Systematic Transfer Plan is Good to enter the Market with LumpSum
We know about a Systematic Investment Plan (SIP) is a very good option when you want to invest in the market as it will help you to have dollar cost averaging. Now people have a lot of money and they want to invest in the market. Their best bet is to invest in lumpsum when the market goes down.
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But the problem is, you cannot time the market, what if the market has gone down and you invest and then the market goes down more? Your lump sum investment entered the market at the wrong time. And to overcome this issue what you can do is continue investing in the market using SIP or you can start the STP.
How I do the Systematic Transfer Plan (STP), is to invest the lump sum into a debt fund and then every month I will transfer some money from that debt fund to the actual equity fund where I want to invest. The only problem I face is that I have to invest in that company's debt fund, where I want to invest the equity from. The STP does not transfer from another company's funds i.e. if I have to invest in IDFC Nifty 50 Index Fund, then I have to invest in the IDFC Debt funds and no other companies' index fund.
But I feel it is ok, and with STP all the money is in the Mutual Fund house and just that it is best for rebalancing when you want to move funds from debt to equity or equity to debt. So, what I am actually doing is that I am continuing my SIP to the equity and debt funds. But for rebalancing or moving from one sector to another I have been using STP. So using both approaches you can invest as well as rebalance your portfolio without doing much manual work.
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