Systematic Transfer Plan (STP): An Alternative Investment Strategy to reduce Risk of Market Timing

Abstract

Systematic Transfer Plan (STP) is a plan where an investor moves from one scheme to another a fixed amount of money, typically from debt funds to equity funds. STP is similar to SIPs or systematic investment plans, where money is moved from bank account to mutual equity funds. In STP, money is transferred in a few installments from a debt mutual fund to a mutual equity fund, so that the total purchase price is weighted suppose investor have earned 20 lakh from an asset sale and want to invest over 24 months in an equity fund through STP. Investor must first pick a debt fund that gives STP choice to invest in an equity fund. Then, choose an equity fund. Invest Rs 20 lakh in the debt fund and then determine the balance from the debt fund to the equity fund and the duration. In the alternative investment plan, the Systematic Transfer Plan (STP) has emerged for a large number of investors interested in high returns but less risk with lump sum investments. The purpose of the study is to know how to put money into STP reduces the risk of market timing and also helps investors to gain more from their source corpus by investing in debt funds. Results of the study found that awareness and operational framework, on the other hand, is one of the key barriers that investors face. The strategy of rupee cost average is an approach that motivates the investor to invest in a systematic transfer plan to gain from market timing risk. This research is also beneficial. The present study also allows investors to analyze the decisions and determine whether or not to invest in them and provides advice to protect their financial goals.