Many a times when I have money to invest, I end up worrying if the markets are too high | interest rates too low to invest. This leads to the usual “Analysis paralysis” state where I do nothing but sit with the money in the bank account. Two ways to go about this, one is pay off loans and the other is “Systematic Transfer Plan”.
I realised lately in my financial journey that paying off loans is a must for achieving financial discipline. There will be many mathematical models (which we will blog about here) but essentially paying your loans off is not bad thing. True financial freedom is always achieved by having a positive net cashflow inwards. This can be achieved by increasing your inflow or reducing your cash outflow. The situation we want to discuss here today however is where you have a bonus credited to your account and you want to invest (without say closing off loans), but do not know what to do or how to do.
Thankfully, to solve this “Analysis Paralysis”, we have a beautiful solution called “Systematic Transfer Plan”. This helps you park money in a liquid mutual fund and then systematically/periodically sell them to invest into riskier Equity Mutual funds. There are many advantages with this solution, but my favourites being:
- Automated investing (We saw here the advantages of this way)
- Average out the market fluctuations thus the cost
- Get rid of analysis paralysis immediately.
STP (Systematic Transfer Plan) is provided by most of these free apps for mutual fund investing like Kuvera. I am a big fan of this mode of automated investing. This basically mimics SIP but commits the money for investment and then automates the entire process.
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