Setting up a Systematic Transfer Plan (STP) allows investors to transfer a fixed amount from one mutual fund plan to another at regular intervals. This helps investors benefit from the potential returns of equity funds while reducing the risks of lump-sum investments. Here's how to set up STP.
Identify the two mutual fund schemes that will be involved in the STP process. Money is transferred from one scheme to another Typically, the source scheme is usually a liquid mutual fund, which provides stable returns at low risk and in which a lump sum can be invested. The target scheme can be an equity-oriented mutual fund in which regular transfers can be made, securing investments at different points in time.
Choose the STP parameters
Investors need to decide the amount they want to transfer from the source fund to the target fund. This amount can be chosen based on financial objectives and liquidity requirements. The frequency of transfer (weekly, monthly, quarterly, half-yearly) also needs to be chosen. The 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 of registering the STP, either through the mutual fund's online platform or by filling up a physical STP form and submitting it to the fund house or registrar, and to the transfer agent's office.
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