It is no secret that investing is a journey. Amount that is invested once, therefore, in an asset or a mutual fund may have to be re-invested in other asset(s) because of the new realities of the market.
Mutual fund houses enable the investors to make this happen by transferring their funds from one scheme to another over a period of time. This option is known as systematic transfer plan (STP).
It essentially means the amount invested in one scheme gradually makes its way to the other via instructions issued to the asset management company (AMC). The scheme from which funds are to be transferred is known as a ‘source scheme’ and the scheme to which this amount is transferred is known as ‘target scheme’.
Instead of transferring the money in one go, one can do so systematically to avoid trying to time the market.
There are usually two key reasons to opt for an STP:
A: You have invested a lumpsum in a low-risk debt scheme and want to transfer funds systematically to a risky equity plan.
B: You have earned gains in an equity scheme and now want to lock the gains by transferring them to a low-risk debt plan.
The process of carrying out a systematic transfer plan is quite simple and straightforward. The investor has to simply choose the ‘source scheme’ and ‘target scheme’ and enter other details.
Here we share further details of opting for STP:
1 First of all, investors need to log in to the account and click ‘invest now’. Here, one has to choose the option of ‘STP’ from the drop-down menu. The other options that you would normally see would include purchase, SIP, switch, redeem and SWP.
2. After you choose the ‘STP’ among the other options in the drop down menu, you need to enter the scheme details: name of source scheme, type of (target) scheme and the name of target scheme.
3. The investor needs to now choose the plan of target scheme, whether it is direct or regular. Then, the investor has to choose the option of target scheme i.e., growth or IDCW (income distribution cum capital withdrawal).
4. Finally, investor has to finalise the details of frequency and tenure of STP i.e., whether it is to be weekly, or monthly or daily. You can also decide the date of month when STP will take place. The STP start date and end date will happen here.