What is STP (Systematic Transfer Plan)?
STP, or Systematic Transfer Plan, is a smart way to move your money gradually from one mutual fund to another. Instead of shifting the full amount at once, you transfer a fixed sum regularly — typically monthly. This reduces the risk of investing everything at a market peak.
In simple terms, it’s like doing an SIP (Systematic Investment Plan) with money you already have.
Why Use an STP?
Imagine you’ve received a bonus of ₹5 lakh and want to invest it in an equity mutual fund, but you’re scared of a market crash. You don’t want to time the market. That’s where STP comes in.
You can park the entire ₹5 lakh in a low-risk debt fund and gradually transfer ₹25,000 every month into an equity fund over 20 months. This way:
- You earn some returns on the parked money
- You reduce the risk of investing at the wrong time
- You average out the cost just like an SIP
How Does STP Work?
- Start with a Lumpsum Investment
Invest your total amount in a low-risk mutual fund (usually a liquid or ultra short-term debt fund). - Set Transfer Amount & Frequency
Decide how much you want to transfer monthly (or weekly) to your target fund — usually an equity fund. - Automatic Transfers Begin
The fund house will auto-transfer the chosen amount at the set frequency. - Money Moves, Not You
You don’t have to lift a finger — it’s all automated. Returns are earned on both sides: your parked money and the invested amount.
Formula to Calculate STP Returns
STP works like reverse SIP. The future value of all the transferred amounts is calculated by compounding each transfer till the end of the investment period.
Formula for each transfer:
FV = A × (1 + r)^nWhere:
- FV = Future value of transfer
- A = Transfer amount
- r = Monthly return rate
- n = Number of months left till end
Total future value = sum of all monthly transfer future values.
Our calculator does this math for you instantly!
Example of STP in Action
Let’s say you:
- Invest ₹3,00,000 in a debt fund
- Transfer ₹25,000 monthly for 12 months
- Target fund returns 12% p.a. (1% per month)
👉 Your total transferred amount = ₹3,00,000
👉 Approx. total future value = ₹3,19,000 (depending on exact returns)
So you earn while transferring, and reduce risk at the same time!
When Should You Use an STP?
✅ You received a large bonus or lump sum
✅ You want to enter equity but are worried about timing
✅ You want to reduce risk while still aiming for long-term growth
✅ You already have a debt mutual fund but want to shift to equity
Types of STP
| Type | What It Does |
|---|---|
| Fixed STP | Transfers a fixed amount regularly |
| Capital STP | Transfers entire gains (profits only) |
| Flexible STP | Transfers amounts based on market conditions |
Key Benefits of STP
- ✅ Reduces market timing risk
- ✅ Earns returns on parked funds
- ✅ Helps in rupee cost averaging
- ✅ Fully automated, hands-free investing
- ✅ Safer route into volatile assets like equity
FAQs on STP (Systematic Transfer Plan)
Q. Is STP better than SIP?
A: SIP is great if you invest monthly from income. STP is better if you already have a large lump sum and want to spread risk.
Q. Is STP taxable?
A: Yes. Each transfer is considered a redemption and is taxed based on capital gains (short-term or long-term depending on holding period of source fund).
Q. How is STP different from SWP?
A: STP is for investing gradually; SWP (Systematic Withdrawal Plan) is for withdrawing gradually — like during retirement.
Q. Which funds allow STP?
A: Most AMCs (mutual fund houses) allow STP between their own schemes (within the same fund house).
Q. Can I stop or pause STP?
A: Yes, you can modify, stop, or pause STP anytime by submitting a request to your fund house or through your mutual fund platform.