Question 1

What is STP (Systematic Transfer Plan)?

Accepted Answer

STP is a facility that allows you to transfer a fixed amount from one mutual fund scheme to another at regular intervals. It's commonly used to gradually shift money from liquid/debt funds (lower risk) to equity funds (higher returns) over time, helping reduce market timing risk.

Question 2

Why should I use STP instead of lumpsum investment?

Accepted Answer

STP helps reduce timing risk by averaging your entry into equity markets over time. You park your lumpsum in a debt fund (earning 6-8% returns) and systematically transfer to equity funds. This provides rupee cost averaging benefits while keeping your money invested throughout.

Question 3

What is the ideal STP duration?

Accepted Answer

Most investors use 6-12 month STP periods. Shorter durations (3-6 months) suit moderately volatile markets, while longer periods (12-18 months) work better in highly volatile conditions. The goal is to average out market fluctuations while not staying in debt funds too long.

Question 4

Which funds should I use for STP?

Accepted Answer

Start with liquid funds or ultra-short duration debt funds as the source (low risk, decent returns). Transfer to diversified equity funds, flexi-cap funds, or index funds as the target. Ensure both funds are from the same AMC to avoid exit loads and simplify the process.

Question 5

Are there any charges for STP?

Accepted Answer

Most AMCs don't charge for STP itself, but check for exit loads on the source fund if withdrawing within the specified period. Some funds have a minimum holding period. There's no entry load on mutual funds. Capital gains tax applies based on holding period when you finally redeem.

Question 6

Can I stop or modify my STP?

Accepted Answer

Yes, you can stop, pause, increase, or decrease your STP amount anytime by submitting a request to your AMC. There are no penalties for stopping STP. You can also set up multiple STPs or change the transfer frequency as per your needs.

Period	Source Balance	Target Balance	Total Transferred
Year 1	₹9,48,364	₹1,26,825	₹1,20,000
Year 2	₹8,92,996	₹2,69,735	₹2,40,000
Year 3	₹8,33,625	₹4,30,769	₹3,60,000
Year 4	₹7,69,962	₹6,12,226	₹4,80,000
Year 5	₹7,01,696	₹8,16,697	₹6,00,000
Year 6	₹6,28,496	₹10,47,099	₹7,20,000
Year 7	₹5,50,004	₹13,06,723	₹8,40,000
Year 8	₹4,65,838	₹15,99,273	₹9,60,000
Year 9	₹3,75,588	₹19,28,926	₹10,80,000
Year 10	₹2,78,813	₹23,00,387	₹12,00,000
Year 11	₹1,75,043	₹27,18,959	₹13,20,000
Year 12	₹63,771	₹31,90,616	₹14,40,000

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