FAQs

Mutual Funds

11 Jan 2019

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re pretty consistent as money invested in debt fund earns interest till the time it is transferred to equity fund. The returns in debt fund are higher than returns from savings bank account and assure relatively better performance. Averaging of cost – STP has some integral features of systematic transfer plan (SIP). Similar to SIP every month an amount is invested in an equity fund. One of the differences between SPT and SIP is the source of investment. In case of the former money is being transferred from a debt fund and in case of later investor’s bank account. Since it is similar to SIP, STP helps in averaging out the cost of investors by purchasing fewer units at a higher NAV and more at a lower price. Rebalancing portfolio – An investor’s portfolio should be balanced between equity and debt. STP helps in rebalancing the portfolio by reallocating investments from debt to equity or vice versa. If investment in debt increases money can be reallocated to equity funds through systematic transfer plan and if investment in equity goes up money can be switched from equity to debt fund.

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