Systematic Transfer Plan

Imagine a scenario when you want to invest a big lump sum amount in stock market ? As markets are volatile and can go up or down very soon , there is always risk of loosing a big chunk of your investment. Take a case where you want to invest 10 lacs in Equity Mutual funds and suddenly market crashes for next 2 months, In this case a big chunk of your investment will be lost, on the other hand if market moves up pretty fast, you can make a good profit. Here you have to decide your main focus. If it’s minimizing risk and getting good decent returns in long-term, You should use something called Systematic Transfer Plan (STP) .


Consistent Return.

Money invested in debt fund earns interest till the time it is transferred to equity fund.The returns in debt fund are higher than returns from savings bank account and assure relatively better performance.

Averaging of Cost.

STP has some integral features of systematic transfer plan (SIP). Similar to SIP every month an amount is invested in an equity fund. One of the differences between STP and SIP is the source of investment. In case of the former money is being transferred from a debt fund and in case of later investor’s bank account. Since it is similar to SIP, STP helps in averaging out the cost of investors by purchasing fewer units at a higher NAV and more at a lower price.

Re-balancing Portfolio.

An investor’s portfolio should be balanced between equity and debt. STP helps in rebalancing the portfolio by reallocating investments from debt to equity or vice versa. If investment in debt increases money can be reallocated to equity funds through systematic transfer plan and if investment in equity goes up money can be switched from equity to debt fund.


Fixed STP.

In this type of Systematic Transfer Plan the transferable amount will be fi xed and predetermined by the investor at the time of investment

Capital Appreciation.

The capital appreciated gets transferred to the target fund and the capital part remains safe

Flexi STP.

Under Flexi STP unit investor have a choice to transfer variable amount. The fixed amount will be the minimum amount and the variable amount depends upon the volatility in the market.