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Systematic Transfer Plan

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STP stands for Systematic Transfer Plan.

It works in a similar manner to Systematic Investment Plan and Systematic Withdrawal Plan (SWP) but with a difference.

It is a way of investing in which funds from an already invested source mutual fund scheme can be transferred to a destination mutual fund scheme.

In this method, we can explicitly specify the dates on which the funds need to be moved.

This method can be used only when both the source and destination schemes are managed by the same Asset Management Company.

Example 1

I can first invest in DSPBR Short Term Fund and then give a STP instruction to transfer funds to DSPBR Small and Midcap Fund. This is allowed and acceptable.

Example 2

I can first invest in DSPBR Short Term Fund and then try to give a STP instruction to transfer funds to Reliance Smallcap Fund. This is not allowed and not acceptable because DSPBR and Reliance are two different AMCs.

Example 3: Practical implementation

Allowed STP Dates are: 01,07,14,21,28

The dates differ from one AMC to another.

For instance assume i made Rs. 25000 investment in a debt fund

I want to switch Rs. 5000 to equity fund per month

So, i will give that switch instruction here

I will give an instruction that on 1st of every month, switch Rs. 1000

Then i will add another STP instruction

I will give an instruction that on 7th of every month, switch Rs. 1000

This way, i will give 5 instructions for 5 differnent dates

So every week, 1k will get transfered.

When there no funds in your debt fund. the stp automatically gets stopped.

So i just make sure that when ever i get some big amount, i put it into debt fund.

And switches will automatically take place.

Switch gets stopped when debt fund dosent have minimum money.

Got it?

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