What is STP in mutual fund | STP full form and meaning

Today we are understand what is STP in Mutual fund , what is the full form of  STP in mutual fund ,

So Friends you all are know about, what is mutual fund and how to invest in mutual fund , now we are understand STP meaning In mutual fund, first we start what is STP.

 

What is STP in mutual fund & Meaning?

There are mainly 2 type of mutual fund allow to invest 

1- S.I.P  ( Systematic investments plan )
2- S.T.P ( Systematic Transfer Plan )

So investors you are now understand the full form of STP, Now we can understand & how to STP work in mutual fund , 

Basically Systematic Transfer Plan (STP) are allow to investors to sifting their investing money from one mutual fund scheme to other mutual fund scheme without any hassles.

Investors money transfer from one scheme to other scheme on periodically, enabling investors to gain market advantage by changing to securities when they offer higher returns. It safeguards the interests of an investor during market fluctuations, to minimize the damages incurred.

In Violated Market S.T.P ( Systematic Transfer Plan ) help to investors to transfer money from one mutual fund scheme to other mutual fund scheme.

Transfers are usually made from debt funds to equity funds if the market is doing well and vice versa, if the market is not performing well. 

The STP can be classified based on the amount transferred from the source scheme to the target scheme. 

If a fixed sum is transferred from the source to the target scheme, then it's called Fixed STP, 

and if the sum transferred is the profit part of the investment of source scheme, then its called Capital Appreciation STP.

 

Types of Systematic Transfer Plans

Basically there are mainly Three types OF STP in mutual fund 

1-Flexible STP

In this type of systematic transfer plan, the total funds to be transferred are determined by investors as and when the need arises. Depending upon market volatility and calculated predictions about the performance of a scheme, an investor may want to transfer a relatively higher share of his or her existing fund, or vice-versa.

 

2- Fixed STP

In case of a fixed systematic transfer plan, the total amount to be transferred from one Mutual Fund to another remains fixed, as decided by the investor.

 

3- Capital systematic transfer plans

In this types transfer the total gains made from market appreciation of a fund to another prospective scheme with a high potential for growth.

 

FEATURES OF  S.T.P ( Systematic Transfer Plan )

SEBI  (Securities and Exchange Board of India ) mandates no minimum amount of investment to invest through systematic transfer plan in Mutual Funds. However, most asset management companies require a minimum investment of Rs. 12,000 to be eligible for this scheme.

A minimum of six transfer of funds is mandatory for investors to apply for investment under this scheme. Entry load on Mutual Funds is not applicable, but the exit load is charged on each transfer made. 

A maximum of 2% can be charged as exit fees while redemption/transfer of funds.

However, transferring resources from a liquid fund to an equity fund does not attract any charges under exit load.