Invest A Lump Sum With A Systematic Transfer Plan (STP)
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Systematic transfer plan or popularly known as STP, operates like a systematic investment plan (SIP). As you might be aware, SIPs involve investment of a fixed amount over specified time intervals in a mutual fund scheme.
Difference between SIP and STP
The difference, in case of STP is that instead of your bank account, the amount gets transferred from one scheme to another. Through STP, you can transfer parts of a lump sum investment from one mutual fund scheme to another scheme, within the same fund house at regular intervals.
How STP helps investing lump sums
STP works well for investors who have a large sum of money to invest, typically in equity markets, but do wish to invest over a period of time. Such a transfer averages the cost of purchase and reduces risks from market turbulence while investing the large amount.
How STP works
The investor can first park his lump sum funds in a liquid fund. It then gets transferred to a scheme over time through regular SIP-like instalments. The scheme where the money is transferred is usually an equity or balanced fund of the investor’s choice. The transfer goes on till the money is completely transferred.
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