STP in Mutual Funds Explained: Benefits, Returns and Top Fund Picks

A Systematic Transfer Plan (STP) allows periodic transfer of a fixed amount from a low-risk fund like a liquid or debt fund to an equity-oriented scheme within the same fund house.

An STP example using ICICI Prudential Mutual Fund: an initial Rs 2,00,000 in ICICI Pru Liquid Gr with monthly Rs 10,000 transfers to ICICI Pru Equity & Debt Gr turned the total investment into Rs 8,92,171 over nearly 11 years.

The STP strategy reduces the impact of market volatility by entering equity markets gradually, avoiding the risk of investing a lump sum at a single price level.

Returns from the transferee scheme were 15.11%, significantly higher than the transferor scheme's 7.62%, showing the benefit of disciplined equity investing.

STPs are generally available only between schemes of the same asset management company, and taxation and exit loads may apply.