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Can you clear my doubts about mutual fund STPs

Lump sum or STP? shedding of confusion please. After going through the advice I deposited Rs 2L in ICICI Liquid Fund in Aug, 2016 and start weekly STP of Rs. 5000. In the last week of Aug my first STP was made @ Rs 127.50 ps. the STP is going on regularly. What I have observed that the average of per Unit after paying 30 instalments not come down from my first purchase per unit i.e, Rs 127.50 ps. My question is that had I invested this amount in one lump sum at the beginning my entire investment was at Rs 127.50 ps per unit where as through STP it would be quite hire. Kindly clear the myth or confusion in this regard. Further I have another Rs 5L to invest in Balance Fund then in how many months it should be TRD through STP to get average? The longer the period of transfer higher the chances of loosing averaging as the unit rates may increase in majority of instalments as happened with me as stated above. Kindly enlightened with all pros n cons?

Apr 12, 2017 by Vinay Vashisht, Chandigarh  |   Mutual Fund

We could not understand your query well! Though you have mentioned that you have started the STP from ICICI liquid fund, you have not mentioned the target scheme name, i.e. the scheme to which you are transferring Rs 5,000 per week.

We think you are bothered more about the liquid fund averaging whereas it should be the reverse, you should be worried about the target scheme rupee cost averaging (actually, that is the logic for doing STP).

To clear your confusion, we have used our STP return tool and chosen ICICI Liquid Fund to invest Rs 2 Lakhs and then chosen ICICI Prudential Focused Bluechip Fund (target scheme) to do weekly STP of Rs. 5000. Date of investment is August 01, 2016. Following is the result –

Out of the 2 Lakhs invested in ICICI liquid fund, Rs 1.80 Lakhs has been transferred to ICICI Prudential Focused Bluechip Fund. The balance in the liquid fund account is Rs 25,286, a profit of Rs 5,286. The value of Rs. 1.80 Lakhs transferred to the equity fund is now Rs 194,155, a profit of Rs 14,155. Please check the same in details from here https://www.advisorkhoj.com/mutual-funds...

We have tried our best to make you understand the concept of STP through an example and hope you are satisfied with that! Happy investing !!

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