In this plan, money is first parked in a debt fund of your choice.
The money is then gradually transferred to your equity fund.
It is done in order to buy units in a staggered manner and in order to average out the cost.
This is also known as rupee cost averaging.
The benefits of this plan are as discussed: - As the money is parked in secure debt funds, the money continues to grow.
- Systematic transfer is done to buy equity units in a staggered manner.
- Unlike a systematic investment plan, transfers can be made daily.
- As the money is already parked, there is no chance of default.
-The parked money continues to earn returns as per debt fund norms and the transferred money grows as equity.
-It helps in rupee cost averaging.
-There is no hassle of bank accounts.
-The process can be stopped at will.
T A T A Mutual fund has this process on offer.
They offer the customer the choice to transfer money in a systematic manner and on a daily basis from its debt schemes to its equity schemes.
The minimum amount that has to be parked is rupees 10000.
Thus it proves to be a great tool to average out the ups and downs of market.
It scores over a regular S I P in the following manner: It doesn't involve the hassles of bank transactions regularly.
The former may stop in case of a default but it will never stop as there is no chance of default.
Thus Systematic Transfer Plan is a great tool to invest in equities in a regular and hassle free manner.
It is also the best tool to reduce the risk by applying the rule of rupee cost averaging.