Systematic Transfer Plan (STP) Calculator
About STP Calculator
The STP (Systematic Transfer Plan) calculator is an effective tool to help investors plan their mutual fund investment strategy. By averaging out market volatility and ensuring disciplined investing, it enables you to transfer a fixed amount between mutual funds over time, reducing risk..
How Does the STP Calculator Work?
You make a one-time investment in a mutual fund (usually a debt fund) and designate a monthly transfer amount to another fund (usually an equity fund). Based on the expected annual return, this calculator calculates the total amount transferred, the remaining balance, and the potential growth on the remaining balance..
Benefits of Using an STP
- Reduces the risk of market timing
- Enables disciplined and methodical investing.
- Helps investors gradually convert from debt to equity and maximize returns by compounding the remaining amount.
Frequently Asked Questions (FAQs)
1. What is a Systematic Transfer Plan (STP)?
STP is a mutual fund facility that enables investors to move a set amount between mutual fund schemes on a regular basis, typically from a debt fund to an equity fund.
2. How is the estimated growth calculated?
The calculator estimates the compounded growth from the remaining capital by using your monthly balance and applying the monthly return, which is derived from the annual return.
3. What happens when the balance is less than the monthly transfer amount?
The STP (Systematic Transfer Plan) stops when the remaining amount is less than the fixed monthly transfer. The remaining funds can either stay invested or be withdrawn or transferred manually based on the investor’s decision.
4. Can I use STP for short-term investments?
STP works better for medium- to long-term plans, particularly when reducing market risk by gradually switching from a lump sum investment to equity..