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Lumpsum vs STP: which option would give maximum returns?

If you have any mutual fund queries, message on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.

ET Online|
Oct 23, 2019, 12.22 PM IST
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I would like to know whether investing in a lumpsum is good or investing the same amount through STP better? Which option would yield higher return? My horizon is 10 years.
--Anuj Jain


Most mutual fund advisors/managers and financial planners ask investors to avoid lumpsum investments in equity mutual funds. They recommend staggered investments. This method will help you to avoid investing the entire money in a certain level in the market, they say. However, this is not backed by any comprehensive study. The results of lumpsum staggered investments throw up different results at different points. For example, a lumpsum work better in a bull market. However, most agree that staggered investment method offers more comfort or peace of mind and confidence to regular investors.

You can stagger your investments through an STP. If the sum is modest, you can invest it in a few months. If it is large, you may opt for weekly or monthly STP to stagger your investments.
(If you have any mutual fund queries, message us on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.)

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