An STP is a plan that let’s investors to give consent to a mutual fund to periodically transfer a certain unit/amount from one scheme and invest in another scheme of the same mutual fund house.
Thus, at regular intervals an amount/number of units you choose is transferred from one mutual fund scheme to another of your choice. This facility thus helps in deploying funds at regular intervals.
Various types of STPs:
– In Fixed STP, the investor takes out a fixed sum of money from one investment to another.
Capital Appreciation STP
– In Capital Appreciation STP, the investor takes the profit part out of one investment and invests in the other.
– In Flexi STP, the investor has a choice to transfer a variable amount. The fixed amount will be the minimum amount and the variable amount depends upon the volatility in the market.