Self-disciplined investing is the key to financial success. However, to put this into practice is difficult because it is impossible to time the market. Everyone loves to buy equities when the market is at a low and sell when they reach at high. It sounds a perfect strategy easier said than done. But, most of the times, it becomes more difficult to predict the exact behaviour of market. While investing we are always in fear that what about if market goes down further.
To counter this volatility, mutual funds offer tools such as systematic & disciplined investments plans like systematic Investment Plan (SIP) and systematic Transfer plan (STP) always give more benefits in the fluctuating markets. But still they do not give full benefits when markets are low, especially when you want to invest a big lump sum amount in equity market. As markets are volatile and can go up or down very soon, there is always risk of losing a big chunk of your investment.
Let’s take a case you have lump sum of Rs1 lakh and want to invest in equity mutual funds and suddenly market crashes for next 2 months. In this case a big chunk of your investment will be lost; on the other hand if market moves up pretty fast, you can make a good profit. Here you have to decide your main focus. If it’s minimizing risk and getting good decent returns in long-term.
Normal Systematic Transfer Plan
In these kinds of situations, a systematic transfer plan (STP) will make sense from debt to equity when markets are very volatile and you don’t want to take risk with your money in a short span of time, If you invest through STP in markets and markets fall or have lots of volatile moves, then this situation will be better than the one time investment option. This is still better than putting money in Bank and doing a SIP, because at least you money is earning some returns on debt part in STP. In case markets are already at the end of a Bear market and markets can start it up move anytime, in that case STP will not deliver the best returns like SIP.
Flexi Systematic Transfer Plan
In that case, no need to scare, as a new product in the market goes a step further: put more money and, therefore, also buy more units in falling markets and less money in rising markets. While, HDFC Asset Management Co. Ltd calls it HDFC Flex STP – Systematic Transfer Plan can help in getting good returns. It will accelerate investments automatically when markets are low. It is basically modified version of normal STP. In Flexi STP, you have provision to invest systematically and you can buy more also when markets are low.
A Flexi STP does not always involve a fixed amount, but the fixed amount will be the minimum amount that will invested. The actual amount that will be transferred to the target fund varies along with fluctuations in the market, the beauty of the product is that when the NAV of the target fund falls the investment is accelerated to take advantage, whereas when the market keeps moving up a minimum amount is always invested so that you don’t miss taking advantage of further rises.

Let’s take HDFC Flex STP as an example for get better understanding. You have lump sum  investment amount for Rs.60,000 that you would like to invest. A wise decision is not to invest this amount into an equity fund at one go to protect you from price fluctuations, but invest this into a Debt Fund and setup a STP to an equity fund. Let’s compare the performance of normal STP and a Flexi STP over a 12 months period.

Scenario 1
You setup a normal STP that transfers Rs5,000 every month from the Debt Fund to an Equity Fund.
                                                                                                                                Source: HDFC Mutual Fund
At the end of 12 months, total units purchased: 5642.43 by investing a Total amount of Rs60,000 indicating an Average price of 10.63 and final market value is Rs73,352.
Scenario 2
You, now setup a HDFC Flex STP with Minimum STP Amount as Rs 5,000.
The STP amount for a month is calculated as the Maximum of (Min STP Amount, Min STP Amount * Instalment – Current Market Price of Existing Units in the Target Fund). From the table below, the STP amount for the 2nd month would be Maximum of (5000, 5000 * 2 – 6000) = 4000/-
                                                                                                                      Source: HDFC Mutual Fund
At the end of 12 months, total units purchased: 6,047.95 by investing a Total amount of Rs60,000 indicating an Average price of 10.63 and final market value is Rs78,623.
As seen in the above illustration by investing through HDFC Flexi STP, you end up buying more units with Higher Final Market Value and Lower Net Average Cost per unit and the monthly investment varies according to market movements.
You can opt for any of the fund house’s debt schemes (liquid, ultra short-term, bond and so on) as well as its plain-vanilla diversified equity funds, including HDFC Prudence Fund, a balanced fund. You could choose daily, weekly, monthly or quarterly transfers.
When your fund house offers a flexible transfer plan, it bodes well if it also discloses the formula that determines your monthly transfer like HDFC Flexi STP. The features of STP are best suited for low risk appetite investors. They can invest lump sum in mutual fund scheme and avail STP facility. This gives an immense option to transfer amounts periodically between debt and equity fund as discussed by shielding invested capital amount.
This is just an illustration explaining the concept of Flex STP using assumed figures. The above illustration is merely indicative in nature and should not be constructed as advice. It does not in any manner imply or suggest performance of any HDFC Mutual Fund Scheme(s).
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Suresh Kumar Narula

SEBI Investment Advisor, Founder & Principal Financial Planner at Prudent Financial Planners
Suresh K Narula is founder and Principal Financial Planner at Prudent Financial Planners. He has earned the professional CERITIFIED FINANCIAL PLANNER and got registered with SEBI as Investment Advisor. He writes on personal and financial planning articles and got published in Dainik Bhaskar, Business Bhaskar and The Financial Planner's Guild, India. He is also a member of Financial Planner's Guild India ( An association of practicing SEBI registered Investment advisers) to create awareness about Financial Planning in general public, promote professional excellence and ensure high quality practice standards. Suresh received his an from Himachal Pardesh University and an MFC from Punjab University, Chandigarh. He can be reached at
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