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Investment made easy: Understanding systematic transfer plan in mutual funds

Mutual Funds offer a strategic investment practice called Systematic Transfer Plan. It helps you invest your money wisely in various schemes by transferring the investments of an existing mutual fund to another one.

The Securities and Exchange Board of India (SEBI) has permitted mutual funds to provide STP as an investment option to investors so that they can streamline their financial journey. Whether you are an experienced investor or a newbie, understanding the Systematic Transfer Plan can facilitate you with numerous investment benefits. 

If you have a question about what systematic transfer plan is, reading this article can clear all your doubts. In the following article, we will learn about STP mutual fund and how STP works

What is Systematic Transfer Plan?

While learning about STP the first thing to learn about is the  STP full form. The full form of STP is a Systematic Transfer Plan in mutual fund. A systematic Transfer Plan is an investment scheme offered by mutual funds that allows investors to transfer their funds from one mutual fund to another mutual fund within the same Asset Management Company (AMC). 

It is up to the investors how much money they want to transfer from one mutual fund to another. The funds that need to be transferred can be fixed or vary based on the interest of the investor. 

The funds can be transferred from one to another mutual fund in fixed intervals. The Systematic Transfer Plan equips investors with a disciplined approach to managing their funds. 

Types of Systematic Transfer Plans and how STP works?

There are three types of systematic transfer plans in mutual funds, namely,

  • Flexible STP
  • Fixed STP
  • Capital STP

Let’s discuss the types of STPs in detail. 

1. Flexible STP

In a flexible systematic transfer plan, the funds that need to be transferred are not fixed and can be changed according to market conditions and the preferences of the investor. 

The investor can increase or decrease the amount of funds that are going to be transferred from one mutual fund to another based on the goal of the investor or the performance of a mutual fund scheme. 

2. Fixed STP

In a fixed systematic transfer plan, the amount of funds that will be transferred from one mutual fund scheme to another is predetermined. 

The amount is fixed according to the appeal of the investor and is constant throughout the STP. The amount the investor determines automatically gets transferred to the other mutual fund scheme in a fixed period. 

3. Capital STP

In a capital systematic transfer plan, the funds that were originally invested in the mutual fund scheme are kept in the source scheme(original scheme) only while the capital(profit) of that scheme is transferred to the other scheme. 

The profit earned in the source mutual fund scheme is transferred to the destination scheme(another scheme) while the primarily invested money remains invested in the source scheme. 

Benefits of Systematic Transfer Plan

The benefits of a systematic transfer plan are given below in detail. 

1. Higher returns

The first and one of the most important benefits of a systematic transfer plan is the high returns it provides to the investors. As it allows you to transfer your funds from one scheme to another scheme, you can transfer your funds from an underperforming scheme to a profitable scheme. In this way, you can take advantage of the fluctuation of the market and gain high returns. 

2. Stability

Another major benefit of a systematic transfer plan is that it furnishes investors with stability. In times of market volatility, investors can transfer their funds to a relatively safer mutual fund scheme. In this way, a systematic transfer plan allows investors to earn a decent amount of money while safeguarding their funds. 

3. Portfolio balancing 

A systematic transfer plan is extremely helpful in balancing your portfolio. As you can transfer your money from one mutual fund scheme to another mutual fund scheme, you can maintain a balance in your portfolio. This increases the chances of profits and reduces the chances of loss because all the money is not invested in a single scheme. 

4. Rupees cost average

Rupee cost averaging is a technique that investors use to lessen the impact of market volatility. In this technique, investors keep on investing small amounts of money in the market regardless of the market condition. Investors buy more units of an asset when the price is low and sell them when the price is high.


A systematic Transfer Plan is a great way to reduce the risks of market volatility and gain higher profits. Investors who are looking forward to balancing their portfolio can choose STP in mutual funds. A systematic transfer plan offers stability and higher returns and helps in rupee cost averaging. If you want to know more about the stock market and investment-related topics, you must visit StockGro.


What is a Systematic Transfer Plan(STP)?

A systematic Transfer Plan is an investment technique offered by mutual funds that helps you diversify your portfolio by transferring funds from one mutual funds scheme to another.

What are the different types of STPs?

Systematic transfer plans in mutual funds are of three major types: flexible STP, fixed STP, and capital STP.

What are the benefits of STP?

A systematic Transfer Plan provides numerous benefits to investors that help them in a multitude of ways. STP allows investors to balance their portfolios, provides stability, and helps them earn higher returns.

What is an optimal portfolio?

It comprises various percentages of bonds, equities,  commodities, and other asset classes.  It is very important to add low-risk assets if the risk tolerance is low.

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