Systematic Transfer Plan or STP is strategic option offered to investor to move from one scheme to
another scheme of a same asset management company (AMC). STP option is advantageous when one scheme
performing well and another scheme is performing well of same asset management company. Investor get
the chance to move his funds to
good performing scheme of same AMC. You can switch from one scheme to another scheme and transfer
fixed or variable amount to other schemes. As investment in mutual funds comes with inherent market
volatility and high risk it might happen that one scheme of equity / debt funds is not performing
well. Thus, it is beneficial to switch or transfer from one scheme to another which is why STP is
preferred. STP can be done only when investor already has units of a particular mutual fund scheme
and mutual fund scheme is open ended.
Consider an example where investor has 500 units of Fund A with Scheme 1. Due to market risks, performance of scheme 1 is not well in current situation. In this situation investor has chosen to start STP in Fund A in scheme 2 which is at lowest price and performing well. So after STP is started on the same date as of SIP, units of Fund A with scheme 1 will be redeemed and units of Fund A with scheme 2 will be bought. Thus investor money is transferred to another scheme hassle free.