What is an STP?
A Systematic Transfer Plan transfers a fixed amount from one mutual fund scheme to another every month – typically from a liquid or ultra-short-term debt fund into an equity fund. It's the smart way to deploy a lumpsum in volatile markets: your money earns 6–7% while parked in the liquid fund and gets averaged into equity over 6–12 months, reducing timing risk.
Frequently Asked Questions
How long should an STP last?
Typically 6–12 months for deploying a lumpsum into equity. Longer STPs defeat the purpose.
Is STP tax-efficient?
Each STP instalment is a redemption from the source fund, so it may trigger small short-term capital gains. The overall impact is modest.