Systematic Transfer Plan

POSTED BY Kiran ON July 31, 2011 8:06 pm COMMENTS (8)

Dear readers

I have started investing in equity diversified MFs ( through funds india) with in the last couple of months. I have got lumpsum amount of about 10 lakhs to invest via STP. 

My queries are

1.How to select and start the STP in Liquid/debt oriented funds

2. How would be the taxation of Debt/Liquid floater funds worked out 

3. Is it have to be in the same fund houses which I hold the equity based Mutual funds

I have tried looking in to the archives in jago investor, but couldnt come to a complete understanding. Please enlighten me . Your help would be much appreciated.

 

8 replies on this article “Systematic Transfer Plan”

  1. jignesh says:

    Ramesh can you please give me your views or REVIEW my Portfolio??

    http://localhost/jagoforum2/portfolio-analysis/1711/

    Other than that i have 1 Lac in hand and want to invest it for wealth creation. can you give your views on that?

    Thanks for your help.

  2. jignesh says:

    How about doing the same thing using Value investing plan??? Put 10 Lac in Debt fund and doing VIP with the same fund house??

    Ramesh may throw some idea about VIP , which will be useful for others also.

    Thanks

    1. Ramesh says:

      @ jignesh
      I am not very impressed by VIP. On paper, it appears fine. But over a long period of time, I dont think it will give you any major benefit.

      Ramesh

  3. Kiran says:

    Thanks for the response Ramesh

    I have got this money ( 10 lakhs) exclusively to be allocated towards equity MFs.
    Currently I am doing SIP through a normal NRE savings bank A/c.

    With the NRE A/c all I get is meagre amount of interest way below the normal savings a/c

    Is it better to go through a STP option ( for SIP) from debt/liquid floater to Equity Mutual funds or to let it be as it is? what are the pros and cons.

    Please advise

    1. Ramesh says:

      Ok. So the money is of equity asset allocation.

      Better in terms of what?
      Lose the “short-term outlook” / “near-term probable loss” perpective. Does it matter if you had invested when sensex was at 5000 or 6000 7 years ago, though there is a difference of 20% between the two levels.
      Can you predict whether the sensex will reach 21k or 15k in the next 6 months. since, we cannot do so, it is better to keep things simpler, assess what should be the asset allocation we are happy with, and then correct the portfolio according to that. If that requires lumpsum, then be it.

  4. Ramesh says:

    1. correct. not possible. same fund house’s funds are required.
    2. the debt MF also have expense ratio and exit load similar to equity MF. Though, they are usually lesser than equity MF. check them out from valueresearchonline.com / morningstar.in
    3. First you get your goals set. then accordingly, you set your portfolio allocation. finally, according to that allocation, you allocate your money (corpus, lumpsum) to debt and equity. In this eg, say you have 10 lakhs lumpsum (cash) and 10 lakhs in other debt funds + FD + PPF and you need 50-50 equity-debt. Then you need to allocate the whole 10 lakhs to equity as lumpsum. I think you get the point.

    Since, we cannot predict the future, we cannot “usually” say that it is better to have a STP or lumpsum at any given point of time.

  5. Kiran says:

    Thanks for the response Ashal.

    1. If I have equity funds from 2 different fund houses, then is it not possible to open a single liuid fund/ debt floater fund of one particular fund house and divert the funds in to these via STP?

    2. Are there any hidden expenses in debt/floater funds compared to equity mutual funds.
    (I understand about expense ratio of equity MF and exit load if withdrawn less than a year )

    3. Is it better and safer to do investment via STP if I have the lumpsum for investing in equity Mutual funds

    please advice
    regards

    Kiran

  6. ashal jauhari says:

    Dear Kiran, Let me answer your query with an example – Say you are investing in HDFC Top 200 fund & out of those 10L Rs. you want to invest 2L Rs. in HDFC top 200 fund through STP. in this case – The Debt fund should be from the same AMC (HDFC in this case).

    Once the money is in Debt fund, you may start STP from debt fund to Eq. fund.

    Regarding taxation of Debt funds – The capital gains if any ‘ll be taxable at your marginal rate of tax – slab rate you are in at present because the capital gains ‘ll be of short term in nature (less than I year holding.).

    Hope this ‘ll help you. Please feel free to ask if you need more help.

    Thanks

    Ashal

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