Putting away funds in the savings bank account comes naturally to most investors. While leaving aside money for regular expenses and contingencies is a prudent move, leaving an excess amount of money idle isn't. Investors must explore investment avenues for parking surplus funds at their disposal. Short-tenured fixed deposits emerge as a feasible option; investors can explore investment opportunities with their local banks. Another option that should be considered is short term plans offered by income funds.
STPs are targeted at investors with a short-term investment horizon and hold a commensurate portfolio (most STPs have a maturity profile of around 1 year) as well. The table below indicates the performance of leading STPs.
Short term plans: Leaders over a month
| Income-STPs | NAV (Rs) | 1-Mth | 6-Mth | 1-Yr |
| TATA SHORT TERM FUND | 11.42 | 0.57% | 2.20% | 4.52% |
| BIRLA BOND PLUS RETAIL | 12.01 | 0.49% | 1.95% | 4.33% |
| PRINCIPAL INCOME STP | 11.65 | 0.47% | 2.07% | 4.77% |
| K BOND SHORT TERM | 11.64 | 0.45% | 1.87% | 4.50% |
| JM SHORT TERM FUND | 11.60 | 0.45% | 1.96% | 4.85% |
Apart from scoring over savings bank accounts in terms of returns, STPs also offer investors a high degree of liquidity. Another advantage offered by STPs is the opportunity to easily transfer funds to an alternate scheme within the asset management company.
Find out how STPs have performed across time horizons
For example if you are looking at investing in an equity fund offered by a given AMC, but feel that the time is inappropriate, you can consider parking your money in a short term plan offered by the same AMC. When the right opportunity presents itself, your investments can be conveniently transferred to the fund of your choice.
Another option for investors is to use the systematic transfer plan. For instance, take an investor who uses the systematic investment plan by issuing 12 cheques from his savings bank account. He can instead invest the lumpsum amount in a short-term plan and transfer the money through a systematic transfer plan into the proposed scheme. This way his money earmarked for SIP investments will continue to work for him in the STP as opposed to languishing in a savings bank account.
Short term plans give investors the opportunity to gainfully invest their surplus funds and rake in reasonable returns without taking on too much risk. More importantly it induces investors to get invested on a regular basis which is a key to sound financial planning.