Business Desk – A STP ( Systematic Transfer Plan) offers an investor the to transfer a fixed amount from their investment in one mutual fund scheme to another scheme.
STP can start by investing a lump sum amount in a mutual fund scheme and asking the fund house to transfer a fixed amount from their investment to the other destination scheme. It automatically stops when the money has been transferred over a period of time.
There are two types of STP in mutual funds – Fixed STP and Capital appreciation STP.
In fixed STP, a fixed amount is transferred at regular intervals from one mutual fund scheme to another.
In capital appreciation STP, the capital gains are transferred from one mutual fund scheme to another.
Benefits of Systematic Transfer Plan
There are several benefits of STP which follow as:
It allows an investor to rebalance the portfolio by allotting investments from debt to equity.
It is similar to SIP and helps in Rupee Cost Averaging.
The returns in debt funds are usually higher than in savings bank accounts.
Its aim is to assure better performance.
In addition, before investing in STP consult with a financial advisor.