Systematic Investment Plan, Systematic Transfer Plan, Dividend Transfer Plan & Value Averaging Plan


Investment should be made in a systematic way to as to get maximum benefit out of it. Following article tells the methods of different types of investment.

All of us must have seen a girl walking on a rope with a wonderful balance and a stick in her hand. Her every step on the rope presses the rope and the rope gets somewhat down from that point. Stock market is also full of lots of ups and downs. Investors should also follow some technique so as to maintain a balance of better return. Normally, most of the investors make investment only when there is an up slope in share market and they start selling their shares when there is downfall in the market. It's a challenge for the experts to determine the appropriate time of purchasing in the market. The measure to get the better returns at the average cost in the long run is that you invest small amount of money at regular intervals in the Diversified Equity Funds being tested on the various parameters. Systematic Investment Plan (SIP), Systematic Transfer Plan (STP), Dividend Transfer Plan, Value Averaging Plan, etc are popular methods of regular investment.

Systematic Investment Plan (SIP)


Investment in Equity Mutual Fund is best option for people with regular income. Small portion of money is invested in SIP which makes a large fund in the future. Investment of a certain amount is done under SIP on daily, weekly or monthly basis. Their purchased value turns average by purchasing of units in different market conditions. A person with very low income can also invest a small amount of just Rs. 50 in SIP to get the benefits from Equity Mutual Funds.

According to chief executive of Sahara Mutual Fund, N.K. Garg, his asset management company is waiting for the permission of SEBI for the beginning of SIP with just Rs. 10 per day. However, the company has already started STP of Rs. 100 per day.

For more details about SIP, please visit the webpage at What is SIP (Systematic Investment Plan) and its benefits?

Systematic Transfer Plan


When the investor has money to invest and it is also hard to guess about the market and one of the good options is to invest in Systematic Transfer Plan. STP is quite similar to SIP. In STP, a certain amount is invested out of which a small portion is withdrawn from time to time and is invested in some other fund. STP is better option of investment for those investors who want to take benefit of SIP by doing lump sum investment.

The purchase price of units of mutual funds gets average by this method of investment. To follow this policy, investor should invest his lump sum investment in loan funds. Liquid funds are basically loan funds that protect money funds from fluctuations. Investment is not done in equity under it. An investor can choose bond funds for investment of lump sum money as the dividend distribution tax is at its minimum of 13.8%. The amount under dividend option reaches in the hands of investor as tax-free, whether it is weekly or daily, because the mutual fund company has paid the dividend distribution tax before the distribution of dividend. There is one more option under STP under which a small portion of fund is transferred in loan funds from Equity Oriented Fund on a regular basis. When there is fastness in share market then the whole fund of loan fund is reinvested in equity funds.

Dividend Transfer Plan


Under Dividend Transfer Plan, the dividend received from any loan plan is invested into any equity fund of same fund company. It is different from Dividend Reinvestment Plan wherein the investment of dividend is made in the fund providing the dividend.

Value Averaging Plan


Wherein a certain amount is invested in SIP at a regular interval of time, but the amount of investment is not same under Value Averaging Plan. The rate of return is predetermined in advance under VIP and the amount of investment keeps on changing according to the market conditions. Investors have to determine the minimum and maximum amount of investment at regular intervals of time. The facility of VIP is available in S&P 500 Fund of Benchmark Mutual Fund. You can also invest through VIP in any equity fund for free through fundsindia.com


Article by Nidhi
Nidhi is a freelance content writer with 5+ years experience. She has great passion to write on valuable topics so as to provide accurate information to her readers. She is also keen to provide employment to all Indians and so posts various job openings too in this website.

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