A Systematic Transfer Plan (STP) is a mechanism that allows you to automatically transfer a fixed amount of units from one mutual fund scheme (source scheme) to another mutual fund scheme (target scheme) at pre-defined intervals. It essentially acts like a bridge, gradually shifting your investment from one fund to another based on your risk tolerance and investment goals. Imagine you have a lump sum amount you want to invest in the equity market for long-term wealth creation. However, you’re apprehensive about the inherent volatility of equities. An STP can be your ideal solution. Choose your source and target schemes: You’ll start by selecting a source scheme, ideally a low-risk debt fund or balanced fund. This scheme will act as your parking place, providing steady returns while your risk appetite adjusts. For the target scheme, choose an equity fund aligned with your long-term goals. Set your transfer frequency and amount: Decide how often you want the transfer to occur (monthly, quarterly, etc.) and the fixed amount you want to move. This could be a percentage of your initial investment or a specific rupee value. Sit back and relax: The STP will automatically execute the transfers at your chosen intervals, gradually shifting your investment from the source scheme to the target scheme.