Buying Low and Selling High has been the most popular strategy amongst investors across the world. This investing strategy offers a black and white take on how one can realize the profits in the market. Often investors ask – Is it truly possible to optimise the cost of purchase? A systematic transfer plan may have the potential to do so.

Irrespective of the market tide, Investors often ask – How can you make the most of your investments?

In an internal study, our analysts compared the journey of two investors. The infographic below will give you an insight on which systematic transfer plan you can choose.

Let’s look at the investment journey of two investors in 2 different scenarios.

Description – A simple comparison between Normal STP and Turbo STP with expected returns. The above image is for illustration purpose only. Past Performance may or may not be sustained in future.

What is Turbo STP?

Aditya Birla Sun Life AMC Limited (ABSLAMC) Turbo Systematic Transfer Plan (“Turbo STP”) is a facility wherein unit holder(s) can opt to transfer variable amount(s) from source Scheme(s) to Target Scheme(s) at defined intervals. The Unit holder would be required to provide a Base Instalment Amount that is intended to be transferred to the Target Scheme. The base instalment amount is multiplied with the Equity Valuation Multiplier (EVM) score to arrive at the value of transfer for each instance of Turbo STP.

What is a systematic transfer plan in mutual funds?

A systematic transfer plan (STP) is a way to invest in mutual funds wherein an investor sets up a plan to periodically transfer money from one fund to another. The money is transferred at predefined intervals (weekly, monthly, etc.) and helps the investor take advantage of market movements.

Who uses the STP facility typically?

STPs are often used by investors who want to invest in equity mutual funds but are worried about volatility in the stock markets. By starting an STP, the investor can send small amounts of money into an equity mutual fund every week or month. This averaging out of investment costs is called rupee cost averaging, and it helps to reduce the risk of investing in equity mutual funds.

Why should I use a systematic transfer plan?

There are several reasons why you might want to consider using an STP:

Averaging out your investment costs:

When you invest in mutual funds through an STP, you're buying units at different prices. This technique is called rupee cost averaging and it can help reduce the risk of investing in equity mutual funds.

Timing the market:

Many investors try to time the market by waiting for the perfect moment to invest. However, this often leads to missed opportunities and regret later on. By investing through an STP, you can tend to take advantage of market movements without having to time the market perfectly.

Disciplined investing:

An STP can help you stay disciplined with your investments. It takes away the temptation to time the market or try to second-guess where the markets are headed next.

What is the difference between Normal STP and Turbo STP?

Benefits of Turbo STP over normal STPs?

In Normal STP the transfer amount is equal over the life of STP irrespective of market movement. However, in case of Turbo STP {which is Based on an in-house model that tracks a host of technical and fundamental parameters spanning across areas like Valuation Ratios, Trend Ratios, Volatility Ratios to derive a combined signal called Equity Valuation Multiplier (EVM)}, the EVM score helps to decide the overall allocation to equity, therefore the investment into equity is higher when markets are low and lower when the markets are high. The tenure also varies in case of Turbo STP compared to normal STP.

How to start Turbo STP?

Here are the steps that will help you start Turbo STP.

Step 1: Log in to our website using your User ID and password.
Step 2: Once on one login dashboard, click on 'Mutual Fund' tab besides 'Recommended for you' tab
Step 3: Click on View mutual fund portfolio on the right
Step 4: On the mutual fund dashboard, click on transact now followed by STP option
Step 5: Select the Turbo STP mode and enter the necessary details to proceed.

Click here to start Turbo STP

Conclusion:

Turbo STP is an innovative investment facility which automatically invests higher in equity schemes when market valuations are attractive and invests lower amount when the markets are expensive. It intends to optimize allocation of lumpsum money through an in-house valuation model.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.