Beyond mutual funds SIP and SWP: Is STP the missing piece in your investment strategy?

Dear Sir, I understand the benefits of SIP & SWP. However, while researching, I came across STP. Please explain.
 
Tarun  
 
Reply by Rajiv Bajaj, Chairman & MD, BajajCapital
 
Talking about Systematic Transfer Plan (STP), which is a straightforward and effective way to shift funds within mutual funds schemes seamlessly.
               
STP stands for Systematic Transfer Plan and is particularly recommended when you plan to invest a lump sum amount in Equity mutual fund schemes. Given the natural volatility of equity markets, we advise against investing large sums directly into Equity mutual fund schemes. Instead, we suggest investing initially in Debt funds or Liquid funds and then transferring funds from these schemes to selected Equity funds at regular intervals, such as weekly or monthly, based on your preference.
 
For example, if you intend to invest Rs 25 lakh in Equity mutual fund schemes for your long-term goals, we would recommend starting by investing in a Short-term Debt fund and then systematically transferring (STP) Rs 50,000 every week into your chosen equity fund scheme. This approach ensures that the entire amount gradually moves into the Equity mutual fund scheme over approximately one year, helping you mitigate the impact of volatility in the Equity market.
 
It's important to note that each switch (transfer of Rs 50,000) every week may incur a small amount of short-term capital gain, which should be considered when filing your income tax return. The Mutual fund company will provide you with a statement containing the computation of short-term capital gains.
 
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