Systematic Transfer Plan: If you invest in mutual funds through SIP, then this news is not only very important for you, but also beneficial. Today we will learn about Systematic Transfer Plan (STP), which is an investment strategy. Through STP, you can transfer your funds from one mutual fund scheme to another at pre-determined intervals. This transfer happens from time to time, which can give you higher returns.
Funds can be transferred only in different schemes of a mutual fund company
STP proves to be very beneficial in a falling market, which helps in reducing your losses to a great extent. With the help of STP, you can withdraw money from an equity scheme and transfer it to a debt scheme. Similarly, you can also withdraw money from a debt scheme and invest it in an equity scheme. Keep in mind that through STP, you can transfer funds only to different schemes of a single mutual fund company. You cannot transfer funds deposited in the scheme of one company to the scheme of another company.
There are 3 types of STP
There are three types of options available in STP – Flexible STP, Fixed STP and Capital Systematic Transfer Plan. STP has many benefits. When the market is falling, you can switch from one scheme to another to limit your losses. Apart from this, you can also save tax by transferring funds from equity scheme to ELSS scheme. This helps you manage risk.
You can increase returns by reducing risk and loss
With the help of STP, you can transfer your funds from one scheme to another and not only reduce your risk and loss but also increase your returns. With its help, you can transfer funds from highly volatile schemes to stable schemes.
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