STP
STP
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A predetermined amount can be transferred from one mutual fund scheme to another scheme at predetermined intervals using the Systematic Transfer Plan (STP) capability.
What is a Systematic Transfer Plan?
Investors can instantly and hassle-free switch their financial resources from one scheme to the other with the use of a systematic transfer plan. This periodic transfer gives investors the opportunity to take advantage of the market by switching to assets when they have higher return potential. In order to reduce losses sustained during market swings, it protects an investor's interests. The primary advantage of opting for an STP is the streamlined process of fund transfer and utilization. As the money is automatically adjusted between the selected funds, investors can benefit from the seamless and efficient allocation of the available resources
TYPES OF SYSTEMATIC TRANSFER PLANS
Flexible STP : Investors decide the total amount to be transferred as and when the need arises under this form of systematic transfer plan. An investor may desire to transfer a substantially bigger share of his or her existing fund, or vice versa, depending on market volatility and calculated forecasts about the success of a plan.
Fixed STP : When using a fixed systematic transfer plan, the investor determines the total amount that will be transferred from one mutual fund to another.
Capital Systematic Transfer Plans : Plans for systematic capital transfers move all profits from a fund's market appreciation to a new, highly prospective scheme with a high potential for growth.
FEATURES OF A SYSTEMATIC WITHDRAWAL PLAN
There is no minimum investment requirement set by SEBI for mutual funds with systematic transfer plans. However, most asset management companies require a minimum investment of Rs. 12,000 to be eligible.
Investors must make a minimum of six transfers of funds before applying for an investment under this scheme. Mutual Funds do not have entry loads, but exit loads are applied to each transfer. When redeeming or transferring money, exit fees are limited to 2%.
However, there are no exit load fees applied when moving assets from a liquid fund to an equity fund.
Frequently Asked Questions (click here)
What are the benefits of Systematic Transfer Plan? (click here)
What are the benefits of Systematic Transfer Plan? (click here)
Higher returns : STPs allows you to earn higher returns on your investments by shifting to a more profitable venture during market swings. Gaining market advantage in this method maximizes the profits through securities bought and sold in the capital sector.
Stability : Investors can shift their money through a STP into relatively safer investment plans like debt funds and money market instruments during periods of extreme stock market volatility. By doing this, an investor can guarantee the security of his or her financial assets while also generating steady profits.
Taxability : As long as capital gains are realised, each transfer made under the systematic transfer plan is eligible to tax deductions. Gains from such Mutual Fund investments that are redeemed before three years are 15% tax deductible as short-term gains. Tax deductions for long-term capital gains are available, although they are based on the investor's yearly income.
Who should invest in a Systematic Transfer Plan? (click here)
Who should invest in a Systematic Transfer Plan? (click here)
Investments in a plan for systematic transfer For people with little resources who wish to invest in the stock market and earn large returns, mutual funds are the best option. It is also appropriate for investors who want to reinvest their funds during unstable and unfavourable market conditions in relatively safer products like debt instruments.
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