STP

STP stands for Systematic Transfer Plan. It is a way to invest a lump sum gradually: you keep the money in a low-risk fund, often a liquid fund, and move a fixed amount into an equity fund each month.

How it works

Say you have ₹6 lakh to invest but do not want to put it all into equity on a single day. You park it in a liquid fund and set up an STP of ₹50,000 a month into an equity fund of the same house. Each month that amount transfers across automatically, so over a year your whole sum is deployed in steady steps. It works just like an SIP, except the money comes from another fund rather than straight from your bank.

Why use one

The point is to average your entry and avoid the bad luck of investing a large sum right before a fall. Meanwhile the waiting money earns a little in the liquid fund instead of sitting idle, which a bank account might not match. It suits someone who receives a windfall, a bonus, a maturity or a sale, and wants to move it into equity without timing the market.

The fine print

A transfer is a redemption from the source fund, so it can attract capital gains tax and, rarely, an exit load. STPs run between schemes of the same fund house. It is a disciplined tool for deploying a lump sum, not a way to boost returns on its own.