STP can be a good way to mitigate market risks, help cap losses and increase investors’ portfolio returns in the long term. The period of the STP will depend on the investor’s financial goals. However, investors should ideally go for a longer-duration STP into an equity scheme as it would give higher returns in the long run if invested systematically.

How to choose STP ?

Asset management companies offer various types of STPs such as capital appreciation, variable and fixed. In capital appreciation, only the capital returns generated from the source fund are transferred to the destination fund. This type is gaining popularity as the markets were very volatile, especially since January this year. Alternatively, an investor can set up an STP mandate to book profits regularly from an equity fund and transfer the amount to a debt fund to mitigate the market volatility. It can even work well for retirement planning, where a fixed amount of money can be transferred from an equity fund to a debt fund over a period of time, say five years.

In a variable type, an investor can transfer different amounts from the source fund to the target fund depending on the market volatility. For example, if the net asset value (NAV) of the target fund drops due to market correction, then the amount can be increased. On the other hand, if the NAV gains because of the rise in markets, then the amount of investment can be lowered. In a fixed type, a predefined amount is transferred at the given frequency.

Do understand Tax implications

In case of STP, every transfer from a debt fund will be a redemption and attract capital gains tax. So, a redemption before three years will attract short term capital gains tax at the investor’s marginal rate. If the redemption is done after three years, the long-term capital gains tax will be 20% after indexation. Redemption from equity funds before one year will be taxed at 15%, and redemptions after one year will be taxed at 10% for gains over Rs 1 lakh in a financial year. So, evaluate the tax implications before setting the STP mandate.

In a step-up SIP, the investor can increase the contribution at periodic intervals as these are the best way to invest irrespective of the market conditions.The individuals should be wary about making lumpsum investments & they should look at step-up SIPs to gain from the rupee cost averaging and higher compounded returns in the long run.

Increasing the SIP is a good strategy where one can increase investments at regular intervals without disturbing present finances. It also helps you to target a higher corpus in a planned manner and invest more as your income grows over the years. This can be done in any form, by adding a new SIP or increasing the SIP amount. The idea should be to increase investment in funds that are working well for you from a long term perspective.

Nice Question. Most of the investors donot understand the difference between Global Funds and International funds.

International funds invest exclusively in outside of the country of origin. For example , if you are investor in India, then for you, International fund invests outside of India. Some international fund invest exclusively in USA, Some in ASEAN countries, like that. Some invest outside of Japan in other countries.
In Contrast, Global funds are permitted to invest anywhere in the world, including the country of origin eg even in India.
So with your investment in Global fund, you may find, your fund manager might have invested in Indian shares.and in your other investments also , you have invested in Indian stocks.

If you wish to invest in out of country, then international funds are best vehicle, because they offer a pure play on foreign stocks.

Mutual Fund Ratings are just Bakwas. When you donot want to do any research or study while doing your own investment, you take easy way to pick up a mutual funds only based on some ratings, by a website or by a magazine or by a newspapers.
With this , you are eliminating all the funds except one or two top performing funds. Before few years, we had no tools or systems to compare apple to apple comparison of funds, as we can do now.

While these ratings seem to be very useful, they cannot reflect various aspects of fund-performance. More over they are backward looking, measuring something which has already happened. However in financial investments, future trends are also important. Without such estimation Mr. Rakesh Jhunjhunwala would not have picked up Titan Shares at just Rs. 20/30. Take recent examples of Quant Mutual fund. Look at their ratings they go a year before and look at their performance during last one year.
So Ratings are excuse, which many investors use not to do any study prior to their investments.

Sir, Thanks for question. We donot know about your age, other investments , other incomes etc, so precise answer to your quenstion is not possible and cannot suggest any fund now.

Nice question. Many of the mutual funds investors also would like to study our Guidance.

When you buy a mutual fund, you probably hope that its share price will increase over time,because that means your money is growing. But for many funds, it is the reinvestment of earnings that is the real power house. Mutual Fund earnings come from the dividends paid by the stocks . Funds also generate Capital gains and losses when a fund manager sells securities in the portfolio.

In a growth fund, the ability to reinvest income and capital gains automatically by buying additional shares is one of the clear advantage a growth fund offers. The bulk of the long term growth in the stock market comes from this reinvestment rather than from the stock-price appreciation.

Example : lets discuss HDFC Focused 30 Fund. The fund has earned 22.28 % pa returns during last3 years.If you reinvest the amount in this fund, then your reinvested incomes may also earn 22.28% returns in the future, which otherwise would have earned less amounts in FDRs or money market.

Nice and Interesting Question, Mr. Mehta

Last week, we had explained why you should not priorities a fund which has given impressive returns in last one year.Being an investor, you always want a fund that does what you expect it to do and do it repeatedly finishing among the top half among the funds in its category at least 4 years out of 5 years.
Do avoid a fund which perform erratically ( top in one year and bottom in the next) among its peers,even if the average performance is above average.

Your fund investment is just like a cricket team, which you will like to perform in top rank. erratic performance also indicate a fluke performance by the Fund manager,where higher earnings may just by luck. If the fund manager has real edge, then he would consistently pick good stocks.
for example : Axis Bluechip Direct-G
3 Yr Returns 16.78 %,
5 Yr Returns 15.06%,
7 Yr Returns 13.38%,
Returns since launch 15.70%
So here you find a fund which shows consistency in its performance , inspite of Rs. 35915 Cr managed by it.
You should Go for such funds.

Thanks Mr. Parmar for your interest. Soon, in just a week, we shall be starting YouTube sessions and simple questions and answers on Mutual funds. Do subscribe our Youtube channel

Steps :
1) Click this link : youtube.com/c/chanakyanipothi
2) Click “Subscribe” button on our channel

So when we upload a video , you receive notification.

Good Question. If you are studying Mutual fund book from USA, the answer would be that you must invest in International funds, since for a US investors, the international funds means investments in India, China and some other Asian countries.

However since you are an Indian Investor, for you , the answer is International funds are not that much attractive. One generation ago, about 2/3rd of the stocks represented by US companies and now the picture is different. At present about 2/3rd of the stocks are trades outside of USA and the share of USA has declined considerably. At the same time, the share of Euroean stocks have also declined. Moreover the growth rates of their companies are also down. So for an Indian Investors, the returns we earn while investing in Indian stocks is much higher than returns from International funds.
Lets check last one year returns of most of the international funds. Out of 45 International funds, most of the funds have shown NEGATIVE returns during last one year, ( Except ABSL Commodity Agri Global Agri. fund which has earned 23.98% positive returns)
Edelweiss Great China Equity offshore fund has (-) 27.16 returns during last one year, Invesco India Global Consumer Trends funds has (-)31.35% returns.
Yes, if you consider last 5 years returns, then Motilal Oswal Nasdaq 100 ETF has best return of 23.09% pa.and ICICI US Bluechip Equity fund has earned 5 years returns of 19.30%.
So ??? On an average, the performance of Most of the international funds are not impressive ( barring few), and investments in the same may be avoided.

For Mutual funds, fixing a Target price for Sale or redemption is not correct polocy. For Equity stocks, many investors like you fix up target price for sale or buy. So when the price fixed for buying is reached, they make investment and when the stock reaches a target price, they sell the same.
However such strategy doesnot work for mutual funds. In the case of funds, the fund manager is using his own buy / sell displine. So there is no need for your fix Redemption price and sell the fund, when such price/NAV is reached.
you should sell only when the fund is not performing as expected.