What is Systematic Transfer Plan?

How does it work? Mr X had invested ₹60,000 in scheme A (Liquid – Debt scheme). Now, he wants to transfer ₹10,000 every month in scheme B (an Equity scheme). With STP, he can invest in scheme B using his existing investment in scheme A, simply by following a one-time registration process.

Different Types of STP

• Fixed STP – Transfer amount is fixed.
• Capital Appreciation STP – Transfers only profit amount.
• Flexi STP – Transfers variable amount* based on liquidity.

*minimum transfer amount can vary from different schemes

Strategies to use STP Smartly

• Fixing Liquidity Problems – Facing liquidity problems but want to invest regularly? Simple, once you get money, invest lumpsum amount in liquid scheme and start STP into an Equity scheme – it works like SIP.
• Plan Your Tax Savings Better – Let say you have liquidity issue and still want to invest in an ELSS, start a STP from an existing investment in equity scheme to an ELSS and save tax.
• Doing Value Based Investing – Rebalance the portfolio across assets based on market valuation, using STP. When markets look overpriced, start STP from equity scheme to liquid scheme and vice versa.
• Managing Asset Allocation for Goal Based Investing – Investors who are nearing the goal either in terms of amount and / or time can transfer investment from equity to liquid scheme using STP to manage portfolio volatility better.

Happy Investing!

RaVi

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