Skip to main content

Systematic Transfers of Funds can get much better returns

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

Since 2012, it has been a range-bound and fairly volatile time for the equity market. And though we ended 2012 on a high, the seesaw in the interim could have driven many an equity investor away. This is a pity, since those who stayed would have lost out on the 25%-plus return the market generated last year (illustratively, if they'd invested in the beginning of the year).


There's a lesson in this for most of us — even the smartest investors cannot time the market accurately. Therefore, the best way to deal with this is to ensure disciplined investing, irrespective of market conditions.


One of the most widespread and successful ways of doing that is through a systematic investment plan (or SIP as it is commonly known). The key benefits of SIPs, namely rupee cost averaging, compounding of returns and a disciplined approach to investing, are known to most investors.


Today, however, we will talk about systematic transfer plan (or STP) — an approach also based on the same principal as SIP, but, if utilized well, it can potentially lead to better returns.


As the name suggests, an STP is a facility that is offered by mutual funds to their investors to periodically transfer their investments from one fund to another. While the fundamental idea between an SIP and an STP is similar — that is investing small amounts regularly irrespective of market conditions — an STP also allows the investor to periodically switch funds between different asset classes. For example, the investor can hold funds in a low-risk debt fund and regularly shift part of it into an equity fund.


This strategy works if the equity market is volatile, with little visibility on whether they are going to trend upwards.


On the other hand, if the investor is heavily invested in equities and does not want to risk a sudden fall in prices, he/she can book profits by moving the amounts from an equity fund to, say, a lower-risk debt fund using an STP.


This has its benefits — the investor avoids the risk of timing the equity market and at the same time, the corpus earns market returns in the debt fund during the transfer period. It is, therefore, a flexible approach which reduces risk, and can help in optimal asset allocation, with good risk-adjusted returns.


Now, while this seems like a win-win for any investor, one needs to be cognizant of a few important points. First of all, an STP, like an SIP, is a strategy for mitigation of risk. As such, it protects you from losses, but to an extent. While it can alleviate the loss, it can also reduce the overall returns when markets are bullish.


The next point to remember is, as an investor, you need to follow the plan in a discipline manner because an STP's benefits accrue only when you follow the plan properly. Breaking the STP because of short-term market or interest rate movements can harm your investment in the long term.


The third point to keep in mind is, as an investor, you need to understand the underlying assets the funds are investing in and the stage of the market cycle. For example, it would be unwise to transfer money from debt to equity when the market is close to a peak value.
Similarly, it would be counterproductive to transfer money from equity to debt when the market is close to its bottom. Finally, as an investor with an STP, you need to consider and check thoroughly the taxation aspects of such a plan, which entails redemption out of the source scheme.


In the final analysis, it's an interesting and beneficial option if done well. So you could reach out to your investment adviser and inquire about this innovative route for investing.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...

WEALTH TAX

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 WEALTH TAX   WHAT CONSTITUTES WEALTH? For wealth tax purposes, "wealth" means property , urban land, car, jewellery , yacht, boat, aircraft and cash in hand in excess of Rs 50,000. CAUTION POINT | Do not think you will have an easy escape from wealth tax by transferring your `wealth' without consideration to your spouse or minor child. Such assets will also be considered as your wealth. HOW TO DETERMINE YOUR TAXABLE WEALTH Add the taxable value of the above assets (computed as per the detailed rules for valuation) owned by you as on March 31 (for FY 2014-15, it will be March 31, 2015). In case you sold your car during the year, it will not be taxable wealth. Deduct loans if any obtained by you to acquire any of the taxable assets from the value of gross tax out for at least 300 days in a...

Equity Savings Fund

Invest Equity Savings Fund Online   The best part about these funds is that they are subject to equity fund taxation and at the same time are structured like MIP like funds . This new category, equity savings funds , offer a little of everything. They allocate money to equities & equity related instruments, and fixed income. They aim to generate returns by diversification. Such funds invest in fixed income and arbitrage to protect the investors from short term volatility and equity for capital gains. The best part of these funds is that they are subject to equity fund taxation and at the same time are structured like MIP funds.   MIP funds however are subject to debt fund taxation. Investors Equity savings funds are suitable for the following: First time investors who seek partial exposure to equity with less volatility and greater stability Investors seeking moderate capital appreciation with relatively lower risk Those wh...

How to Pick Top Performing Mutual Fund Schemes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   How to Pick Performing Schemes  Funds that continue to stay in the top grade of performance over longer periods are the ones to bet on, advise investment experts   The mutual fund performance charts of the past few months make for an impressive reading. Funds across all categories boast of stellar returns. Sample this: The mid and small cap category has averaged 77 percent return over the past 12 months, with the best fund delivering a staggering 120 percent. The tax-saving funds also average an impressive 51 percent, including a fund which has soared 92 percent. Many of the table-toppers are funds of proven quality and track record. However, there are also schemes that are not that well-known. Some of these have rarely made it to the performance charts in the past, yet, of late, they bo...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now