The allocation for asset classes depends on the standard of living, goals and risk appetite. mutual funds Allow an increase in allocation to an asset class by using a systematic transfer scheme (STP) This way, investors You can transfer investments from one scheme to another.

the possibilities

Asset allocation can be achieved using STP in various ways:

• The lump sum amount can be invested in low risk debt funds and a portion can be converted into one from time to time equity Fund.
• One can periodically withdraw profits from equities and move to debt funds with less risk.

options available

There are different types of STPs on offer.

Fixed STP: A fixed STP amount is regularly transferred from one scheme to another.

Capital Augmentation / Triggered STP:

Transfer to other scheme is done only when a trigger event occurs. For example, transfer to another plan is done when the benefit exceeds a specified amount.


how to install stp

The investor has to fill up an STP enrollment form and indicate the name of the source and target scheme, name of the STP type, amount to be transferred (in case of fixed STP), duration and frequency of STP. STP can also be set up by filling the same details on the online platform of mutual fund,


tax and exit load

STP includes redemption Investment from one scheme to another. Tax on gains will be subject to capital gains depending on the period of holding. Exit load as applicable may be levied on the redemption leg of the STP. Some fund houses waive the applicable exit load for STPs.


things to note

• Lien marked units are not eligible for STP.
• When the remaining units in the source plan are reduced to an amount less than the minimum STP value, the STP may be closed.

Content on this page is courtesy of Center for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.