How to invest in Systematic transfer plans (STPs) for maximum returns Select the two mutual fund schemes that will be involved in the STP process. The money is transferred from one scheme into the other
Setting up a systematic transfer plan (STP) allows investors to transfer a fixed amount from one mutual fund scheme to another at regular intervals. This helps investors benefit from potential returns of equity funds, while minimising the risks of lump-sum investments. Here is how to set up an STP.Choosing funds
Select the two mutual fund schemes that will be involved in the STP process. The money is transferred from one scheme into the other. Typically, the source scheme is a liquid mutual fund, which provides stable returns at low risk, and in which lump sum can be invested. The target scheme can be an equity-oriented mutual fund in which regular transfers can be made, ensuring investments at different points in time.
Choose the STP parameters
Next, the investors need to decide the amount that they want to transfer from the source fund to the target fund. This amount can be chosen on the basis of financial objectives and liquidity requirements. The frequency of transfer (weekly, monthly, quarterly, half-yearly) also needs to be chosen. The period of STP has to be determined to indicate the period for which regular transfers will happen.
Registering the STP
Once the STP parameters are decided, there is a quick process to register the STP either through the mutual fund online platform or by filling up a physical STP form and submitting it to the fund house or registrar, and the transfer agent’s office.
Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.
Connect with Experts - Wealth creation made easy(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
This story originally appeared on: India Times - Author:Faqs of Insurances
