1. It encourages discipline :
Signing up for a SIP is good,..but since the money continues to remain in your bank account you may be tempted to use it for other purposes.
However, if you sign up for a STP, the chance of being indisciplined reduces considerably as the money moves out of your bank account and into the liquid scheme at one stroke. Not seeing the money in your bank account could automatically reduce the temptation to spend frivolously.
2. It may be quicker to start a STP
STPs can usually commence within seven days of applying, while SIPs often take 15 days or more. It is also less cumbersome to commence an STP as the unitholder need not give any instruction to his/her Bank.
3. Chance of earning higher returns:
A STP requires you to first invest in a scheme (often, a liquid fund) and investors in liquid funds usually earn slightly higher returns than those who simply park their money in savings bank accounts.
4. Reduces the scope for fear...
Many times, investors refrain from investing money during market corrections, fearing further falls. The chance of such discontinuance reduces if money is already parked in a liquid fund and is moved periodically into an equity fund.
5. ...and greed
Soaring stockmarkets may tempt us to Invest large sums of money in one instalment, thereby increasing the chance of losses if markets correct suddenly. Investing in a liquid fund and then undertaking STP reduces the chances of suffering from bursts of 'emotional investing'.
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