Systematic Transfer Plans (STPs)

The functioning of STPs is quite similar to that of SIPs in terms of depositing a fixed sum into a fund at regular intervals. The difference here is that a lump sum can be invested in debt funds with nominal risk, and periodically, a specific amount can be transferred to a diversified equity fund.

STPs score over SIPs in a situation where you have the money to invest, but are wary of the turbulence in the market. In such a scenario, it’s better to park your money in debt funds that give decent returns, rather than opting for short-term fixed deposits/savings accounts that earn lacklustre interest. Also, the regular flow of your money into equity funds will ensure that you don’t lose out on the attractive returns they offer.