Hi Grow Experts, I remember there was a discussion on the STP process but don't actually remember what it was.....I am having around 5 lakhs with me so which fund (say fund1) do I invest the lumpsum and then do an STP to which fund (say fund 2). If anyone can help me with the names of the 2 funds - fund 1 and fund 2
AskedSystematic transfer plan (STP) is a plan where an investor invests a lump sum amount in one scheme (mostly a debt scheme) and regularly transfers a fixed amount in another scheme (mostly an equity scheme) on a specified date. It can be the other way round too. Such a scheme helps investors to spread investments over a period of time to average out the purchase cost and rule out the risks of market extremities. The underlying idea behind an STP is to earn a little extra on the lump sum while it is being deployed in equity.
The time period for the transfers can be decided according to the lump sum amount available to invest.
If you have lump sum which you don't need immediately for the next 4-5 years, the simple form of STP can be used. You can invest the lump sum amount in a Debt or a Liquid fund and transfer that amount to an Equity fund.
STP can be done only for intra mutual fund house transactions. Some funds that you can consider are:
STP for Long Term (5+ years)
Source debt funds for lump sum investment
Destination equity funds for STP
STP for Short-Term (3-5 years)
Source debt funds for lump sum investment
Destination equity funds for STP