What is Systematic Transfer Plan?


An increasing number of investors are contemplating their investing methods, considering the global market volatility that affects their profits. Systematic Transfer Plans are beneficial to investors to help mitigate the said risks.


Even though Systematic Investment Plans (SIPs) are quite popular among investors, Systematic Transfer Plans (STPs) may not share the same popularity. While the former involves transferring funds from a savings account to a mutual fund, the latter transfers funds from one fund to another. STP in a mutual fund means balancing one’s investments over a specific period to minimise risks and even out returns.


For example, by investing regularly in securities like equity, one can earn returns safely without any risks even when the markets fluctuate.


In this case, an Asset Management Company (AMC) allows an investor to invest a significant amount in a single fund and regularly transfer a predetermined amount to a fixed scheme. The single fund is termed a transferor scheme or source scheme, while the latter fund is termed a destination scheme or target scheme.


For any kind of transfer, like from debt to equity, the units from the former fund (in this case, the debt fund) are sold. The funds from that sale are used to purchase units in the latter (in this case, equity fund).


STP fund transfer helps save time and energy as various commands required for redemption from one scheme to another are consolidated into a single command/instruction.

How does STP work?


If an investor is investing INR 12,00,000 in equity through the process of an STP, they will need to choose a debt fund that permits the STP to invest in that specific equity fund. After the full amount is selected, it must be invested in the debt fund. Then the option to transfer that money from debt funds to equity funds will be available at the desired frequency.



latest fixed deposits



Taking the crucial decision of opting for STP depends on various factors such as an investor’s current asset allocation, risk propensity and the market condition.


For example, to invest INR 1,00,000 in equity through STP, you must first choose between a liquid or ultra-short-term fund. Then decide the specific amount you want to transfer systematically (desired frequency such as daily, weekly, monthly, quarterly or yearly). For example, if you decide to transfer INR 20,000 each quarter, it will take up to five cycles (quarters) to finish the process and complete the investment.


Initially, fund houses would only permit transfers from debt funds to equity funds in the same company. However, now you can transfer an equity fund of any of the asset management companies to the same of another company.


Let us consider another instance to understand how STPs genuinely operate. A mutual fund investor has presently invested INR 2,00,000 in a debt fund and has been eyeing a specific equity fund for transfer.


He has not made a move yet as the market conditions do not seem too favourable, and hence he is apprehensive that the equity fund may decrease in value post the transfer. But then again, he is conflicted because he does not want to miss out on a potentially good investment if the equity fund’s value increases.


Investing in systematic transfer plans helps:

  • Safeguard Interest Of Investors
  • Provide Higher Returns
  • Provide various tax deductions
  • Rupee Cost Averaging
  • Planned Transfer
  • Manage Risks




Transfers like these (equity debt) are usually done when the market performs favorably. The opposite is done when the market conditions are unfavourable for an investor’s financial goals.


STPs can be differentiated based on the funds transferred from the transferor scheme to the destination scheme. If a predetermined amount is transferred from the transferor scheme to the destination scheme, then it is considered a fixed STP. Whereas, if an amount transferred is from the returns of investment of the transferor scheme, it is termed a capital appreciation STP.


There are various STP fund transfer plans, You will find multiple plans to help you choose the best systematic fund transfer plan according to your financial goals.



Watch the video above by @AdityaBirlaCapital to understand the concept of STP with simple examples.




Interested in how we think about the markets?

Read more: Zen And The Art Of Investing


Watch here: Kuvera insights with industry experts.

Start investing through a platform that brings goal planning and investing to your fingertips. Visit Kuvera.in to discover Direct Plans and Fixed Deposits and start investing today.#MutualFundSahiHai #KuveraSabseSahiHai!

Leave a Comment