Systematic Transfer Plan (STP) Explained: Meaning, Benefits & How It Works
Investing in mutual funds requires not just the intent to grow your money, but also a strategic approach. One such strategy that combines the power of rupee-cost averaging with risk management is the Systematic Transfer Plan (STP). If you’re seeking to optimize returns, minimize risk, and manage your portfolio better, understanding STPs is crucial.In this comprehensive blog post, we’ll break down the Systematic Transfer Plan — its meaning, benefits, working mechanism, types, tax implications, and ideal scenarios for using STPs.A Systematic Transfer Plan (STP) is a financial tool offered by mutual fund companies that allows an investor to transfer a fixed or variable amount from one mutual fund scheme to another within the same fund house at regular intervals.Typically, STPs are used to transfer funds from a debt fund to an equity fund, or vice versa, depending on the market condition and investor’s goal.In simpler terms, STP enables you to invest lump sum in one fund (usually a low-risk one) and periodically shift portions of that money to another fund (usually higher-risk, higher-return) automatically.