We all know that mutual funds are one of the most efficient means to take exposure to the equity markets for the following advantages which they offer:
- Professional management
- Lower entry level
- Economies of scale
- Innovative plans and services
And if we closely assess all the aforesaid points, one would realise that mutual funds actually help in reducing the overall risk to your portfolio.
In today’s dynamic market scenario, while one may aim to advantage of favourable scenarios in both equity and debt markets, there is an inherent risk involved. Thus while you take exposure to these respective asset classes it is important to adopt caution and do it smartly and prudently.
Very often while reallocating assets within categories of mutual funds, investors tend to give redemption request forms and then invest into another mutual fund scheme as they deem fit, rather than using the options such as Systematic Transfer Plans (STPs) and Systematic Withdrawal Plans (SWPs) offered by mutual fund houses.
Under STP, a lump sum amount earlier invested by you can be transferred at regular intervals in a piecemeal manner systematically into another mutual scheme (as desired by you) of the same fund house. Typically 6 such transfers are allowed by the fund houses. Also, most funds houses generally allow an STP from a debt mutual fund scheme to an equity mutual fund scheme, and only handful of them allow it vice versa. Likewise, most fund houses allow a monthly or a quarterly option, while a handful of them allow even a weekly or a quarterly option. Moreover different fund houses have different requirements for the minimum amount to be invested through STP.