Systematic Transfer Plan (STP)

How an STP works

A common use is to park a lump sum in a liquid or short-duration debt scheme and transfer a fixed amount every week or month into an equity scheme. This spreads your entry into equity over time, similar to a SIP.

Each transfer is a redemption from the source scheme and a purchase in the target scheme, both at the applicable NAVs.

Points to keep in mind

• Both schemes must belong to the same AMC
• Each transfer may attract exit load and capital-gains tax in the source scheme
• The amount waiting in the source scheme is also exposed to that scheme's risks

STP or lumpsum - which is better?

An STP reduces the risk of investing everything at a market peak but may miss gains if markets rise quickly. The choice depends on your horizon and comfort with volatility.