Unlike SIP you might not have much knowledge about Systematic Transfer Plan (STP). Systematic Transfer Plan (STP) enables you to invest a lumpsum amount in mutual funds. Systematic Transfer Plan (STP) is used as defense mechanism by the investors to curb the volatility of the markets. In Systematic Transfer Plan (STP), the fund manager or investor can transfer funds from one scheme or asset class to another. In STP, the investor can invest a lumpsum amount and transfer a fixed or variable portion of the investment over time.
In volatile markets, if the investors wish to transfer funds from one asset type to another he/she has to undergo a long procedure. But with the introduction of Systematic Transfer Plan (STP) it is much more easy, time saving and convenient to transfer the funds. The investor can transfer his funds effortlessly at any point of time.
It is generally observed that the funds are transferred from Debt to Equity when the markets are doing well and vice versa. With the help of STP you can earn higher profits by transferring funds from one scheme to another scheme according to the markets. It helps to overcome speculations about the untimely market.
Systematic Transfer Plan(STP) comprises of two types- Fixed STP & Appreciation STP. The Systematic Transfer Plan (STP) are distinguished by the amount which can be transferred. In case of Fixed STP, the investor can take out a fixed sum of money. Whereas in Appreciation STP only profit part can be taken out by the investor.
Let us understand the term Systematic Transfer Plan (STP) better with the help of an example.
Suppose you have invested a sum of rupees 200000 in Debt mutual funds at a certain period of time. After a period of time you come across some article which says that the markets are doing well and may further go down over a period of time. You then check the PE scale to verify the news.
Here if you have invested in some other scheme you would have redeemed your investment or incur loss. But in Systematic Transfer Plan, you can easily transfer your funds from Debt Mutual Funds to Equity Market in order to secure your profit. Hence, we conclude that Systematic Transfer Plan (STP) is any day a better option for investing a lumpsum.
For more information about Systematic Transfer Plan (STP), you can contact Arthashastra Investment Managers Pvt Ltd and avail services from our qualified financial planners. You can also visit the website of Arthashastra Investment Managers Pvt Ltd.