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Swing STP (Systematic Transfer Plan)-New Facility by Mutual Funds

Today I will make you familiar with the new option launched by one of leading fund house of India called “Swing STP”. It is actually a way of investing in Mutual Funds by following the concept called “Value Cost Averaging”.

In normal SIPs which is also called “Rupee Cost Averaging” you invest fixed amount each month without bothering about the market condition just targeting the concept of “Rupee Cost Averaging” but in case of “Value Cost Averaging” you will invest more when the market is low and less when market is up to achieve your target amount.

In “Swing STP” you need to invest lumpsum in Debt Funds and the minimum amount is Rs.12,000. Each month money will get transferred from this Debt fund to Equity Fund (only Growth option). But amount is not fixed. It is depend on market condition. Will see with one example.

Suppose Mr.X invested Rs.12,000 in Debt fund and opted one more fund for investment using Swing STP facility then in the first month Rs.1,000 will get transferred from his Debt Fund to Equity Fund. Next month suppose the market grown and his first month value grown to Rs.1,200 then only Rs.800 is transferred to Equity fund making target amount for second month as Rs.2,000.

Now if the market grown high in the third month and your money grown to Rs.3,500 then excessive amount of Rs.500 of third month targeted amount is get transferred to your Debt Fund, making Rs.3,000 as your third month target. Instead if in third month your money grown just Rs.1,800 then Rs.1,200 is get transferred from your Debt Fund. So money transfer from Debt Fund to Equity Fund is not fix. It depends on market.

Now in case the amount to be transferred is not available in Debt Fund then the residual amount is transferred back to Debt Fund and Swing STP is closed. Existing exit loads will be applicable for each swtich out. This facility will make sense when the market is bullish.

About Basavaraj Tonagatti

Basavaraj Tonagatti is the man behind this blog. He is SEBI Registered Investment Adviser who is practicing Fee-Only Financial Planning Process and also an Independent Certified Financial Planner (CFP), engaged in blogging since 7 years. BasuNivesh blog is ranked as one among India's Top 10 Personal Finance Blog. He is not associated with any Financial product/service provider. The purpose of this blog is to "Spread personal finance awareness and make them to take informed financial decisions." Please note that the views given in this Blog/Comments Section/Forum are clarifications meant for reference and guidance of the readers to explore further on the topics/queries raised and take informed decisions. These should not be construed as investment advice or legal opinion."

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Reader Interactions

Comments

  1. Ketan

    August 21, 2019 at 8:56 AM

    Equity Vs doller
    Or
    Equity Vs gold
    have inverse relationship?

    Reply
    • Basavaraj Tonagatti

      August 21, 2019 at 2:43 PM

      Dear Ketan,
      How it matters to YOU?

      Reply
  2. k.rathnakumar

    February 7, 2016 at 10:53 PM

    dear sir i want invest elss fund every mont 5000 for 3 stp funds which is low risk and i need average return for every year 20% which is the best one my dauther running age 10 i want to to my daughter become doctor so i need 1 crore for another 15 years so please tell exactly which is the best one.

    Reply
    • Basavaraj Tonagatti

      February 8, 2016 at 11:46 AM

      Rathnakumar-20% expectation from equity mutual fund is too high. I prefer 10% to 12% return. Why you need three funds?

      Reply
  3. amar

    February 24, 2015 at 11:35 PM

    Hi sir,
    If we having lump sum amt,is it better to go for STP rather than considering sip

    Reply
    • Basavaraj Tonagatti

      February 25, 2015 at 10:33 AM

      Amar-It depends on when you need and you comfort to invest lumpsum (espcially when the market is high). Some feel it is better to go with one time investment as their goal is long term. But few still feel no need to take risk so STP. But in my view, I don’t feel any difference as long as your goal is of long term.

      Reply

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