STP

Full form: Systematic Transfer Plan

Investments

STP automatically transfers a fixed amount from one fund (usually liquid/debt) to another (usually equity) at regular intervals. Used to invest a lumpsum into equity gradually, reducing timing risk.

In detail

Best use: received lumpsum (bonus, inheritance, property sale). Park in liquid fund, STP into equity over 6-12 months. Tax note: each STP transfer is a redemption from the liquid fund and may attract capital gains tax on profits.

Real-life example

🇮🇳 India example

Sunita receives Rs 15L from property sale. Liquid fund + STP Rs 1.25L/month into Nifty 500 for 12 months. Avoids risk of investing all Rs 15L if market drops 30% next month.

Frequently asked questions

STP vs lumpsum in equity? ▼

If markets rise from day 1, lumpsum wins. But since no one can predict this, STP from liquid fund is the practical, lower-risk approach for large amounts.