Setting up a Systematic Transfer Plan in FundsIndia

Systematic Transfer plans are a method of scheduling switches on a periodic basis in one's account. An investor can schedule a switch once every day, week or month between two schemes that belong to the same fund house.

When to use STP

Systematic transfer plans are typically used to deploy investments in the equity market in a phased manner from a lump sum. For example, if you have to invest Rs.1lakh in an equity fund, it would be better to spread it out into 10 different investments of Rs.10,000 each rather than do a one time investment of Rs.1lakh. This can be achieved using an STP. An investor would invest Rs.1lakh in a liquid fund, and set up systematic transfer plan into the equity fund for Rs.10,000 every month.

Another reason for using STP would be for profit booking - the reverse of the above scenario. Instead of doing a one-time redemption from an equity fund, it might be better to withdraw money in phases out of the equity fund into safer funds such as liquid funds.

How to setup an STP

To setup an STP, an investor would login to their account, choose 'Mutual funds' and select 'STP setup' from the left menu.

The rest of the steps are very similar to the steps for Switch transaction setup (selecting a 'from' fund and a 'to' fund, the units or amount to transfer etc.). However, in the case of STP, in addition, a frequency of transfer as well as the date pertaining to the transfer would need to be specified along with the number of such transfers to be scheduled.

Once these details are given, the STP will be stored in the system.

An initial transfer of the amount equal to the 'Initial investment' will be done immediately, and the subsequent transfers will be according to the schedule specified by the investor while setting up the STP.