In the Systematic Transfer Plan (STP), the investment amount is moved from one mutual fund scheme to another mutual fund scheme. The transfer is made between two mutual funds within the same fund house. Additionally, the transfer usually occurs periodically.
Systematic Transfer Plan (STP)
An STP is a process that makes it simple for investors to transfer their funds from one scheme to another. With STP, generally, investors can periodically move funds in order to limit losses from one scheme and obtain benefits from another. This safeguards investors amid sharp market volatility, particularly when the investor’s preferred fund scheme is underperforming. A systematic transfer plan is considered a disciplined method of investing.
STP is an option for investors in mutual fund schemes. In mutual funds. it refers to the periodic transfer of funds from one mutual fund scheme to another. The source scheme or transferor scheme is the scheme from which the funds are transferred; the target scheme or destination scheme is the scheme into which the funds are transferred.
STP is a good method to stagger your investments over a certain time period in order to limit risk and generate balanced returns. The key advantage of STP is the seamless transfer and utilization of funds.
How Does a Systematic Transfer Plan Work?
A Systematic Transfer Plan (STP) transfers a set amount of money from one fund to another. The fund in which an investor would initially invest the lump sum money must be selected when participating in a mutual fund scheme through STP. Then they must choose the fund to which the funds will be transferred. Additionally, they must select the amount and date of the transfer. Once the lump sum has been invested, the investor should not worry about the transfer. The fund house will handle the money transfer from one fund to another. A systematic transfer plan investment program is designed for a long-term regime; hence, instantaneous huge returns cannot be realized. Investors should have this in mind when selecting this plan.
Who Should Invest via Systematic Transfer Plan?
Plan for Systematic Transfer STP is suitable for investors who want to gradually change the risk profile of their investment portfolio as they age or because of other reasons. It can be due to their levels of risk tolerance or their concerns about market volatility. Investors can therefore make investments in debt or liquid mutual funds and routinely transfer their money to equity schemes or vice versa. As a result, investors can receive set returns from debt funds and possible returns from equity investments. For instance, through Kuvera, investors can explore various mutual fund schemes offered by HDFC Mutual Funds.
How Does The Systematic Transfer Plan (STP) Calculator Work?
The Kuvera STP calculator is user-friendly and simple to use. The future value of a mutual fund STP investment is calculated using the calculator. The following inputs must be entered in order to produce the desired results.
- Investment Amount: This is the total amount a person wants to invest in a fund in one lump sum.
- Tenure: The tenure is the number of months over which one wants to transfer money from one fund to another.
- Growth on Equity: The anticipated increase (rate of return) on an investor’s equity mutual fund scheme investment.
- Growth on Liquid: The anticipated growth (rate of return) on an investor’s liquid fund investment.
The calculator gives the following results:
- Investment: The investor’s original investment amount.
- Return on investment for liquid funds: This shows how much their investment in the liquid fund has grown.
- Return on Equity: This reveals how much their equity mutual fund investment has increased.
- STP each month: Based on the investment amount, transfer tenure, and returns on the liquid fund, the calculator determines the amount to be transferred into another mutual fund scheme.
- Future Value: This is the value of the initial investment amount at a date in the future (after all the STPs). The returns on equity and return on liquid are added together to determine it.
Advantages Of Using The Calculator
The advantages of employing an STP calculator are listed below:
- Simple to use: The STP return calculator is incredibly user-friendly and simple.
- Saves time: The values are instantly calculated by the calculator. For an investor, this saves time. The computations do not have to be done manually by the investors. They can instead use the calculator to swiftly compute the outcomes for the selected investment amount and tenure.
- Accurate results: The value is quickly and accurately calculated using the calculator.
- Better planning: This mutual fund calculator assists in investment planning. The STP calculator can be used by an investor to develop financial plans and select the best investment strategy. In addition, investors can experiment with a variety of situations to see which one best suits them.
- Free to use: It is accessible online. Additionally, using it is cost-free.