Systematic Transfer Plan (STP)

A Systematic Transfer Plan (STP) allows you to transfer a fixed number of units or amount from your investment in one Mutual Fund scheme to another scheme managed by the same fund house on a prespecified day every month.

You can start a STP by investing a lumpsum amount in a mutual fund scheme and giving instruction to the fund house to transfer a fixed no. of units or amount from this investment to the destination scheme. As a result, your account balance in the source scheme i.e. the scheme in which you had made the lumpsum investment gradually decreases every month while your investment in the destination scheme increases gradually every month. The STP automatically stops when all the money from the source scheme has been transferred to the destination scheme over a period of time.

STP is a risk mitigation strategy where you move your investments from an equity fund to a debt fund or vice-versa depending on the market outlook you hold. STP is usually done by investing a lump sum amount in a debt scheme and transferring the money over time to an equity scheme or vice-versa.

STP is best advisable when you have a large sum of money to invest but are not sure how the market will move once you’ve invested your money. So, you gradually move or switch your money from one scheme to another in a phased manner over time.