Systematic Transfer Plan (STP): Meaning, Benefits, Examples & FAQs

• Sushil Bajaj |
• 9 October 2025 |

📅 Last Updated on: October 9, 2025

Investors often look for a balance between safety and growth when managing their portfolios. A Systematic Transfer Plan (STP) in mutual funds offers just that – a structured way to move money from one scheme to another at regular intervals. This not only helps maximize returns but also reduces risks and keeps investments aligned with financial goals.

Whether you want to shift gradually from a debt fund to an equity fund or vice versa, an STP provides a disciplined approach to wealth creation.

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What is a Systematic Transfer Plan (STP)?

A Systematic Transfer Plan allows investors to transfer a fixed amount of money from one mutual fund scheme (source fund) to another (target fund) within the same fund house at pre-decided intervals (daily, weekly, or monthly).

👉 Think of it as the reverse of a Systematic Investment Plan (SIP).

• In SIP, money flows from your bank account to a mutual fund.
• In STP, money flows from one fund to another.

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Example:

Suppose you have parked ₹10,00,000 in a debt fund but wish to enter an equity fund. Instead of transferring the entire lump sum at once, you can set up an STP to shift, say, ₹50,000 every month into the equity fund. This reduces exposure to market volatility and helps in cost averaging.

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Types of Systematic Transfer Plans

1. Fixed STP – A fixed sum is transferred periodically (e.g., ₹10,000 every month).
2. Capital Appreciation STP – Only the gains from the source fund are transferred.
3. Flexi STP – Transfer amounts vary depending on market conditions or investor’s choice.

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Key Features of STPs

• Automation: Once set up, transfers happen automatically.
• Choice of Funds: Investors can pick both source and target funds within the same AMC.
• Periodic Transfers: Daily, weekly, monthly, or quarterly.
• Flexible Amounts: Investors decide how much to transfer and can modify later.
• Risk Management: Smoothens market volatility impact.
• Portfolio Balance: Gradual shift helps maintain an ideal mix of risk and return.

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How Does an STP Work?

1. Choose Funds – Select a source fund (usually debt/liquid fund) and a target fund (usually equity fund).
2. Set Amount & Frequency – Define the transfer sum (₹5,000, ₹10,000, etc.) and frequency (monthly/weekly/daily).
3. Automation – The AMC ensures money moves as scheduled.
4. Portfolio Shift – Over time, the source fund decreases while the target fund grows, rebalancing your portfolio.

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Benefits of Systematic Transfer Plans

Manage Volatility – Reduces risk of investing lump sum during market highs.
Cost Averaging – Like SIPs, STPs average out purchase cost.
Better Returns – Debt funds generate returns till money is transferred into equities.
Liquidity Management – Keeps part of the money in safer debt funds while shifting gradually.
Tax Efficiency – Usually fewer taxable events compared to manual redemptions and reinvestments.

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Things to Remember Before Starting an STP

• Know Your Goals – Match the STP to your investment objective (short-term safety or long-term growth).
• Exit Loads – Check if your source fund charges exit loads on withdrawals.
• Taxation – Each transfer is treated as redemption from the source fund and may attract capital gains tax.
• Choose Right Frequency – Match frequency with your risk appetite and market conditions.
• Review Performance – Monitor both funds regularly.
• Stay Committed – Avoid stopping midway based on short-term market noise.

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Systematic Transfer Plans

Q1. How does an STP help during volatility?
By spreading investments over time, STPs reduce the risk of entering the market at a wrong level and allow cost averaging.

Q2. What is the full form of STP?
STP stands for Systematic Transfer Plan.

Q3. Is STP better than SIP?
Both serve different purposes. SIP suits investors investing fresh money regularly. STP is for investors who already have a lump sum and want to invest gradually.

Q4. Can I decide the transfer amount in STP?
Yes, you can fix or modify the transfer amount as per your goals.

Q5. What are the transfer frequency options?
Daily, weekly, monthly, or quarterly – depending on what your AMC offers.

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A Systematic Transfer Plan (STP) is a smart investment tool for those holding lump sums but wishing to invest gradually. It offers risk management, disciplined investing, and potential for better returns. For beginners or seasoned investors, STPs can be an effective way to balance safety with growth.

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Disclaimer:- Mutual Fund investments are subject to market risks, please read scheme related documents carefully before investing.