What is a systematic transfer plan (STP)? Learn its types and benefits – CNBC TV18

What is a systematic transfer plan (STP)? Learn its types and benefits – CNBC TV18



A systematic transfer plan (STP) is an investment strategy where investors transfer their financial resources from one mutual fund scheme to another at a predetermined interval without any hassle. This transfer occurs from time to time and allows investors to get market benefits by switching on securities providing high yields.

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Thus, it protects the interests of an investor during the ups and downs in the market, which limits the loss. Investors can consider an STP from an equity scheme or up to a loan plan based on market status.

The primary benefit of STP is a quick process of fund transfer and use. Investors can take advantage of smooth and effective distribution of available resources as money is automatically transferred between selected funds.

An STP mutual fund can only transfer the financial resources of an investor among several funds managed by a single asset management business, it is not possible to interpret between many schemes offered by different companies.

Types of systematic transfer schemes:

Flexible STP – This type of systematic transfer plan allows investors to select the total amount to be transferred based on their immediate requirements. An investor can decide to move a large or small portion of his existing fund, depending on the well -informed estimates about the performance of the market conditions and the plan.

Fixed STP – Under fixed STP, the total amount transferred from one mutual fund to another is fixed and determined by the investor.

Capital systematic transfer schemes – This transferred the total profit from the praise of the market of a fund to another promising scheme with strong growth capacity.

Benefits of a systematic transfer plan:

High returns: This allows you to increase your returns on investment by switching on more profitable enterprise during the market rapid rapid. Getting the benefit of the market in this way maximizes the profit from the capital sector purchased and sold in the capital sector.

Taxability: The term taxability implies to what extent tax returns are taxed. Different financial instruments such as mutual funds, savings accounts or shares have different implications, which are determined by norms such as holding time, income level and implementation slabs.

Optimal balance: The optimal balance in investment means that their risk mixture for an investor based on tolerance, financial goals and time horizons. Achieving this balance helps in reducing risks while increasing potential returns, resulting in a well -diverse portfolio with frequent growth.

Stability: During the period of high stock market instability, investors can use STP to shift funds to more stable investment schemes such as debt funds and money market instruments.

Disciplined approach: This allows a disciplined and planned movement of funds between two mutual fund schemes.

Cost average of Rs: The cost of the rupee refers to an investment technique in which an investor regularly invests a continuous amount in a mutual fund, regardless of market movements. This method average the purchase cost over time, which helps reduce the impact of market volatility on investment.

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