SIP is outdated? Now you can become 'rich' with STP, and understand here how it works.
STP (Systematic Transfer Plan) is an option for mutual fund investment. To avoid the volatility of the stock market, a mutual investor can transfer his already invested fund amount to another scheme with the help of a Systematic Transfer Plan. So let's know how STP is different and better than SIP.
If you want to make your future financially strong, then it is very important to choose the right investment planning. But many times people get confused between SIP and STP (Systematic Transfer Plan) for investment. By the way, SIP i.e. Systematic Investment Plan is an easy way to invest small amounts every month, which creates a big fund in the long term, but STP i.e. Systematic Transfer Plan is beneficial for those investors who gradually transfer the lump sum amount to equity funds. However, in the future, benefits are available from both. Yes, in today's time, investors are showing more trust in STP.
Let us tell you that both SIP and STP are considered to be the best options for investing in mutual funds, which also provide you with the facility of disciplined and smart investment. SIP is where you invest a fixed amount every month and create wealth in the long term, while STP i.e. Systematic Transfer Plan is best for those who invest a lump sum amount gradually in equity so that the market risk can be reduced.
In STP i.e. Systematic Transfer Plan, investors transfer a fixed amount from one fund (eg debt fund) to another fund (eg equity fund) at regular intervals. This planning is especially beneficial for those who have invested a large amount at once. However, keeping in mind the risk in the market, money is invested slowly in equity. With STP, entry into the market can be distributed at a good time and the risk can also be reduced.
If you are afraid of market uncertainty but want to invest, then Systematic Transfer Plan (STP) is a smart option for you. STP is a tool through which you can gradually transfer your investment from debt fund to equity fund. For example, suppose you have invested Rs 5 lakh in a debt mutual fund, then you can transfer a fixed amount to equity fund every month. This gives the investor an opportunity to earn good returns while avoiding market fluctuations.
STP i.e. Systematic Transfer Plan is considered helpful in reducing the risk of market timing. It is best for those investors who prefer to transfer a large lump sum amount gradually instead of investing directly in equity. This reduces the impact of market fluctuations and increases the chances of getting better returns in the long run. It is best for those who invest with proper planning at low risk.
If any investor wants to invest gradually, then SIP is going to be an easy and best option for him. In SIP, every month a fixed amount is deducted directly from your bank account and invested in the mutual fund, while STP is beneficial for those investors who have invested a lump sum amount in debt fund and now want to gradually transfer it to equity fund and earn good returns in the long term.
