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Use Systematic Transfer Plan (STP) While Mutual Fund Investment To Protect Yourself From Market Volatility


Making investment under stock market is like a gamble that is why people uses different techniques like Systematic Investment Plan (SIP) or Systematic Withdrawal Plan (SWP) to invest and withdraw their funds in a predefined manner.

Earlier we have discussed about SIP, it is an investment plan which let us invest money in small chunks in the stock market. Now we are here to introduce you with a plan which let you invest your money in lump sum under stock market i.e STP.



What Is Systematic Transfer Plan (STP)?

Systematic transfer plan (STP) is a technique of investment under mutual funds where investor can transfer a fixed amount of investment from one type of mutual fund to another at defined intervals. In other words, when an investor want to invest a lump sum amount under stock market then using STP feature of mutual funds he can choose to invest his funds under debt and equity funds and can switch from one fund type to another to protect his funds in volatile market conditions.

STP plans offers Daily, Weekly, Fortnightly, Monthly, and Quarterly Transfer. Which means investment made by one investor can be switched on defined intervals as per the plan chosen. So to save risk in volatile market condition investor use this facility to switch there investment from equity to debt funds.

Investor investing under mutual funds using STP needs to choose and intimate the AMC about:-

  • Time interval for the transfer from the available options like Daily, Weekly, Fortnightly, Monthly and Quarterly.
  • Fund from which the transfer will take place and the fund to which transfer will take place for e.g from equity fund to debt fund.

For Example, If Mr X want to invest under Kotak 50 Rs 10 Lakhs then he can invest Rs 10 Lakhs as lump sum under a debt fund and then choose the time interval for transferring funds from kotak debt fund to Kotak 50 in small chunks like Rs 5,000, Rs 10,000 or Rs 20,000 as per your choice.

Benefits Of Systematic Transfer Plan (STP)

Offers You The Benefit Of Systematic Investment Plan (SIP) :- As with STP you can first invest your lump sum money in a debt fund and then transfer funds from debt to equity like you make investment under SIP.

Offers You The Benefit Of Systematic Withdrawal Plan (SWP) :- As with STP you can also transfer your funds from equity to debt which help you take out your money in risky market conditions like SWP.

Offers You The Benefit Of Liquidity :- As with STP investor keep the lump sum amount under debt funds and investor can redeem debt funds any time so investor get complete liquidity.  

Offers Returns :- Amount invested under debt funds also offers returns to the investor.


One comment

  1. any how the operation still calls for decision and initiative from the invester adn the roll of th amc fades into insignificance.again as I could unerstand it the decion to swicth must be predetermined and no option to rerain from doing so if the equtie never improve as the case in india since last couple of years.

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