Should you consider ICICI Pru's Booster STP? | Economic Times

ICICI Prudential Mutual Fund has come up with an interesting concept of STPs. This new idea is called the booster Systematic Transfer Plan (Booster STP). Booster STP is an enhanced form of Systematic Transfer Plans wherein unit holders can opt to transfer some amount of their investment from a debt scheme to a designated target equity scheme at defined intervals in the market. The unit holder is required to provide a base installment amount that is intended to be transferred to the target scheme.The fund house has said that the booster STP can vary installment amount from 0.1x to 5x of base installment amount based on the equity valuation Index. Many mutual fund advisors also use this asset allocation model to increase and decrease the investment amount as per the market movement. Through this booster STP feature, a very small amount of base installment is invested when equity valuation is considered expensive. On the other hand, when the valuation is considered cheap, the investment will be higher. “Booster STP leverages rupee cost averaging and value averaging by staggering investment through dynamic installment and dynamic tenure. Market valuation based on which the installment amount is decided is based on Equity Valuation Index,” said Chintan Haria, Head- Product Development & Strategy, ICICI Prudential AMC. Mutual fund experts believe that investors who want to use timing and asset allocation to earn better returns can consider this option. “This is a good idea. Earlier, in the MF industry, we had the concept of trigger exit i.e. on the market reaching a particular level, a certain percentage of the portfolio will be exited - the concept of profit booking. As of today, there are certain advisers that have the concept of model based (market valuation based) allocation to equity and debt funds. The concept of booster STP will modulate the quantum of STP from the debt / money market fund to the target equity fund, based on market valuations. The benefit will be that at lower market valuations, the investor will effectively invest more and vice versa. This will enhance rupee cost averaging,” says Joydeep Sen, author and corporate trainer. Investors who believe in allocation to equity and the India growth story, but are in two minds about the quantum or timing of allocation can take up this option. However, if you don’t want to rely on the in-house models for increasing and decreasing STPs or if you have a plan and strategy in place and are taking help from a seasoned financial planner, you can totally skip the new STP.