There are times when people witness a lump sum inflow in their bank account but they don’t know how to utilize that money wisely.
Some people go on a spending spree, some keep in their savings bank account while some invest it wisely so that the money works hard to get higher returns for the investor.
One such smart way of investing is done through a combination of systematic transfer plan (STP) and systematic investment plan (SIP) in mutual fund schemes.
STP is the method through which as a first step, the lump sum amount is invested in a liquid fund, which is a low-risk option. The next step is to set up a mechanism so that over a period of time a pre-set amount of money is transferred from the liquid fund and invested regularly in one or more funds for the long term. The second step works like an SIP and the funds are selected in a manner which has the potential to give superior returns over the long run.
For financial planners and advisors, one of the thumb rule of investing is that if you have regular salary income, you should settle for an SIP to meet your long term financial goals. And when you see a lumpsum inflow, settle for an STP – SIP combination.
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