Investing in equity through mutual fund STPs: 5 things to know

1.A systematic transfer plan (STP) allows investors with lump sums to benefit from market volatility by using rupee cost averaging through mutual funds.

2.A Sum is first invested in source funds or debt funds. It is then transferred at regular intervals to equity funds, known as target funds.

3.The risk is minimised by investing periodically. At the same time, the funds do not lie idle, earning returns in debt funds till they are transferred.


4.Funds are redeemed from source funds and invested in target funds at the applicable NAV and taxes.

5.STP is flexible, allowing investors to cancel and withdraw from a debt fund after a minimum notice period, useful during emergencies or while changing investment plans.

Content courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.