What is a Systematic Transfer Plan (STP)?
An STP lets you invest a lump sum in a liquid/debt fund and automatically transfer a fixed amount to an equity fund monthly. The lump sum earns liquid fund returns (~7%) while waiting, and equity participation is averaged over 6–18 months to avoid single-point timing risk.
When should I use STP instead of lump sum investment?
Use STP when you have a large lump sum (bonus, property sale, inheritance) and are unsure about market timing. Use lump sum directly when markets are at significant correction or you have a very long horizon (15+ years) where entry timing matters less.
How long should an STP run?
6–18 months for most lump sums. A 12-month STP on ₹50 lakh means ₹4.17 lakh enters equity monthly. Shorter STPs (3–6 months) in falling markets. Longer STPs (18–24 months) for very large amounts or high-valuation markets.
What is the tax treatment during an STP?
Each monthly transfer from the liquid fund is a redemption — potentially triggering STCG (slab rate) on the liquid fund gain. However, liquid fund gains over 1–18 months are small. The tax cost is far less significant than the benefit of averaging equity entry.
STP vs SIP — what is the difference?
SIP invests from your bank account monthly — for regular income earners. STP transfers from one MF to another within the same AMC — for those with a lump sum to deploy into equity gradually. Both achieve rupee cost averaging in equity.
Can I set up STP between different AMCs?
No. STP requires both source and target funds to be within the same AMC. Finvastra selects the optimal AMC with both a good liquid fund and a good equity fund for your STP.
What is a Fixed STP vs Flex STP?
Fixed STP: transfers a predetermined fixed amount — simple and predictable. Flex STP: transfers a variable amount based on fund performance or market valuation — higher when equity NAV is below threshold. Most investors use Fixed STP for simplicity.
Can I stop STP midway?
Yes. STP can be stopped, modified, or paused at any time. The remaining amount in the liquid fund continues earning returns. You can also accelerate the STP or switch to lump sum transfer if market conditions change.
What is Capital STP?
Capital STP transfers only the capital gains earned in the source fund — not a fixed amount. This keeps the principal intact in the liquid fund while gradually building equity exposure from returns only. A conservative strategy for capital-preservation-first investors.
What lump sum amounts is STP most suitable for?
STP is most suitable for lump sums above ₹5 lakh. Below ₹5L, direct lump sum or SIP may be simpler. Above ₹5L — especially for bonuses, ESOP proceeds, maturity amounts, or inheritance — STP provides meaningful risk reduction by avoiding a single large market entry.