Today We will tell you about an important strategy of mutual fund investment, Systematic Transfer Plan (STP). If you invest in mutual funds through SIP, this information can prove to be very useful and beneficial for you. STP allows you to transfer your funds at a predetermined interval from one mutual fund scheme to another scheme, which can help you get better returns.
What is a systematic transfer plan (STP)?
STP is an investment strategy under which investors transfer their money from a mutual fund scheme, transferring to any other scheme of the same fund house at regular intervals. This process takes place from time to time, which can take advantage of market fluctuations.
Special things of the scheme
- Transfer of funds: You can transfer your funds only among different schemes of a mutual fund company. You cannot transfer funds from one company scheme to another company scheme.
- Beneficial in market instability: STP is particularly beneficial in the falling market, as it helps reduce your loss to a great extent.
- Scheme Switching: You can withdraw money from the equity scheme using STP and transfer it to a date scheme or in contrast to invest in equity scheme from date scheme.
How many types of STP are there?
- Flexible STP: In this, you can change the amount to be transferred according to your convenience.
- Fixed STP: In this, a certain amount is transferred regularly.
- Capital Systematic Transfer Plan: This allows the capital of the original investment and the interest earned on it regularly.
Benefits of STP
There are many important benefits of the systematic transfer plan, which makes it an attractive option for investors:
risk management: STP helps you manage your investment risk. When the market is undergoing a decline, you can limit the loss by switching your equity investment to a low -risk scheme (such as date funds).
Returns: In the unstable market, you can increase your returns by transferring funds to comparatively stable schemes from more volatile schemes.
Reducing loss: In the unfavorable environment of the market, this strategy helps in reducing losses.
Tax Savings: You can also avail tax savings by transferring funds from equity scheme to ELSS (Equity Linked Savings Scheme).
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