What are Systematic Transfer Funds? How does it work?

Systematic Transfer Plan (STP) is a way of investing lump sum amount in a scheme and regularly transferring a fixed or variable amount into another scheme.

May 14, 2017 04:05 IST India Infoline News Service

Systematic Transfer Plan (STP) is a way of investing lump sum amount in a scheme and regularly transferring a fixed or variable amount into another scheme.
 
STP helps the investors in case of a volatile market by periodically transfer funds from one scheme (source scheme) to another (target scheme) and help them save the effort and time by compressing multiple instructions required for redemption from one scheme to invest in the other into a single instruction.
 
If the market is doing well, transfers are usually made from debt funds to equity funds and vice versa if the market is not performing well. The STP can be classified based on the amount transferred from the source scheme to the target scheme.
 
If a fixed sum is transferred from the source to the target scheme, then it's called Fixed STP, and if the sum transferred is the profit part of the investment of source scheme, then its called Capital Appreciation STP.

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