MisterBond's Value STP Calculator
We make statements like do systematic transfer from Debt to Equity over 3-6 months and we will create an average and capture volatility in Equity markets. But if these transfers would have happened in say Red Zone (expensive valuation zone) than there is not much difference between investing in Lump Sum and STP over these 3-6 months. If we wish to cover Red (expensive valuations), Yellow (reasonable valuations) and Green (cheap valuation) zones; transfers have to happen over 60 months. An Investor will invest lump sum amount in Debt (Liquid, Liquid Plus or Equity Income/Saving schemes) scheme and give one-time instructions to the Fund House to transfer in 60 instalments to Equity scheme of the same AMC. This is what we call regular STP. However, MisterBond believes that investment is all about valuation game. If for example an Investor has started regular STP of Rs.1 lac p.m. from debt to equity; why shouldn’t we transfer say Rs.3 lacs in Yellow Zone (reasonable valuation zone) and Rs.5 lacs in Green Zone (cheap valuation zone)?
So, Value STP of MisterBond is 1X (Red Zone), 3X (Yellow Zone), 5X (Green Zone) spread over 5 years. Based on valuations; funds may get transferred from debt to equity in less than 60 months (if valuations are cheaper due to 1X, 3X, 5X formula). Investors should be happy if transfers happen over shorter periods of time instead of longer periods of time as they are investing in Equity at best possible valuations. Once funds have moved from Debt to Equity; Smart Investing strategy of MisterBond will take over.