Systematic Transfer Plan
An arrangement to move a fixed amount at regular intervals from one scheme to another within the same fund house.
Formula
Test: units are redeemed from the source scheme and invested in the target scheme on a stated schedule
Unit
₹
In depth
An STP is the standard way to deploy a lump sum into equity gradually: the money sits in a liquid or ultra-short fund earning something, and moves into the equity scheme in instalments. Each transfer is a redemption from the source scheme and therefore a taxable event, which is the cost most investors overlook — an STP from a debt fund generates taxable gains at every step. It reduces the risk of investing everything immediately before a fall, at the cost of leaving money out of the market if prices rise. Whether that trade is worthwhile depends on the size of the sum relative to the portfolio.
Worked example
₹12,00,000 parked in a liquid fund transfers ₹1,00,000 monthly into equity over a year. The liquid fund earns perhaps 6% on the declining balance, and each of the twelve transfers is a redemption with its own gain to report.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Systematic Transfer Plan” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.