Systematic Transfer Plan or STP is a variation of Systematic Investment Plan (SIP). STP is an investment tool where an investor transfers from one asset or asset type into another asset or asset type. In this type of mutual fund investment platform the transfer of fund happens gradually over a period a time.

After SIP, Systematic Transfer Plan is the second best favorable investment strategy. Similar to mutual fund investments through SIP, STP is also one of the best risk mitigation strategies of the mutual fund arena.


How Systematic Transfer Plan works?

So how Systematic Transfer Plan helps you to build a corpus? So before we jump in to the understand STP lets first understand SIP!

SIP is the best mutual fund investment strategy where the investors invest a predefined sum of money in mutual funds through regular interval. SIP draws benefits from rupee cost averaging and hence it is the best strategy for investing in volatile market for efficient risk mitigation.

For example, if you start your investments of Rs. 5000 per month via SIP, the money will be debited from your account every month and will be invested in the mutual funds that you have chosen for systematic investment plan (SIP).

Hence SIP is known as the most disciplines way of investing money to achieve your financial goals like retirement planning, child marriage planning or child education planning.

Now let’s understand Systematic Transfer Plan (STP). In STP investments, a lump sum amount is first put in debt mutual funds and further transfers are usually made from these debt funds to equity funds.

Let’s say if an investor wants to invest Rs.10 lakhs in an equity fund through an Systematic Transfer Plan (STP), first we will choose a debt fund which allows STP to invest in that particular equity fund.

Once we choose the both equity as well as the debt plan, we will invest the whole amount i.e. Rs. 10 Lakhs in the selected debt fund. We will then have an option to transfer the money from debt fund to equity fund by choosing the suitable investment frequency.

If the market is doing well (bullish), an investor can book profit and transfer the profit part from equity funds to the debt funds, on the contrary, if the market is not performing well (bearish), there lies an opportunity to push more money from debt funds to equity funds to make most out of the bear run.

However it is also advisable by mutual fund experts not to book profits very frequently as it affects the power of compounding.

We, at Chitale Financial Solutions, will help our investors to rebalance their portfolio as and when required during bull and bear markets. That is why STP is considered the best financial instrument for investing in volatile market like the one we are facing which is Corona Crash.

Why to choose Systematic Transfer Plan (STP):

We are well aware that investing through mutual funds is the best way to enter the equity market so that investors can beat the inflation can surf the bullish waves and make profit from stock value appreciation.

However many investors are also interested to invest in debt market to get steady growth. STP is smartest investment approach for such investors who wish to invest in both equity and debt market to balance the risk.  

For investors who are seeking to build corpus through mutual funds exposure, STP provides a balanced and very cautious approach for mutual fund investments.

Equity market is idea for capital growth while debt market is best suitable to protect the capital and that is why a proper combination of both equity and debt funds can help an investor to make most out of both asset classes.    

Many investors keep their entire emergency fund in saving account which is not at all advisable. It is always advisable to keep enough money in your saving accounts so that it can take care of at least six months of your expenses.

Rest of the money can be invested in STP as it can work as an alternative to your SIP investments. The debt scheme will definitely grow your money, help to optimize mutual fund portfolio and give higher returns as compared to the interest you are earning on fund lying in the bank saving account.

Types of Systematic Transfer Plan (STP):

Systematic Transfer Plan is of two types. One is fixed STP and the other is capital appreciation STP.

In STP investment, the scheme where the money is transferred is called the target scheme while the scheme from where the money is being transferred is called source scheme.

Fixed Systematic Investment Plan (STP):

If an investor is investing fix amount from source scheme to target scheme, the STP is called Fixed STP.

Capital Appreciation Systematic Investment Plan (STP):

If an investor is transferring profit from the source scheme, then the STP is known as Capital Appreciation STP.

Systematic Transfer Plan (STP) Calculator:

As you have understood the concept of STP, you might be thinking, how can I calculate total returns on my investments? How do I know how much money to be invested to achieve my financial goals?

Don’t worry; our STP calculator will help you with the numbers! Our STP calculator is very easy to understand and even easier to use!

You just need to choose the AMC, source scheme, target scheme, enter the initial amount you wish to invest through Systematic investment plan, your STP date, Monthly transfer amount and the date range, that’s it!

The STP calculator will calculate the returns instantly. The calculator will show you absolute as well as annualized returns.  

Our STP calculator along with SIP Calculator is one of the simplest tools available on our website which will help you to make smart mutual fund investment decision.

There is a complete range of AMCs, source and target schemes available in the calculator which you can choose. Our STP calculator will carry out complex investment calculations to produce the results.

Benefits of Systematic Transfer (STP) Plan:

Systematic transfer plan provides various investment benefits like a Systematic investment plan (SIP), below are some of the top stp benefits:

Portfolio Balancing through Systematic Transfer Plan (STP):

STP helps an investor to rebalance the portfolio by transferring investments from debt to equity or vice versa depending on the volatility of the market

Averaging of Cost from Systematic Transfer Plan (STP):

As STP is a variant of Systematic Investment Plan (SIP), it also has some essential features of SIP. One of the key differences between SIP and STP is the presence of source and target scheme for investment.

In case of the SIP money is transferred from bank account to target scheme while in case of STP, money is transferred usually from a debt fund to target scheme hence STP also helps in rupee cost averaging.

Better Returns through Systematic Transfer Plan (STP):

As investor’s money is initially put in debt fund; it starts yielding returns by the time it is transferred to equity fund. As the returns in debt funds are usually higher than the interest earned from savings bank account, best systematic transfer plan aims to provide comparatively better returns.

Who should invest in Systematic Transfer Plan (STP)?

STP is an ideal instrument for those who want to invest a lump sum amount in mutual funds. STP is ideal for investors who are looking for safer investment strategies for equity markets.

It is also suitable for investors who want to reinvest their profits in less risky debt instruments when market is unstable.  

Why Chitale CFS Pvt Ltd?

Chitale CFS Pvt Ltd offers wide variety of investment avenues for short as well as long term investment needs. With more than 30+ years of experience, we are one stop solution for a number of financial products like Mutual Funds, Insurance, Bonds, Fixed Deposits etc. We serve our clients with highest standard of transparency and integrity by putting investor’s interest first.

You can contact us by calling on +91 8999116127 or email us at [email protected]  or   [email protected]

Mutual fund investments are subject to market risks. Please read the offer document carefully before investing

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Mutual fund investment is subject to market risk, read scheme related document carefully before investing.