What is STP and how does it work? An explainer

Retail investors exercise a lot of caution before deciding to invest in a mutual fund scheme. This arrangement is known as systematic transfer plan wherein investors have the option to transfer some of the funds in their portfolio from one plan to another. The funds can be transferred from one fund scheme to another offered by the same fund house, but carrying out such transfer between different asset management companies is not allowed. Reason to opt for STP Rupee cost averaging: One of the key reasons to opt for STP is to be able to buy fund units at different price levels to leverage the benefits of rupee cost averaging. Advantages of choosing STP Higher returns: During a bull market, investors can shift some of the funds from debt or fixed income schemes to equity schemes or index funds to increase the scope of their earnings.