Mutual funds have long been the preferred financial instruments for investors looking to invest in the stock market without managing their portfolios actively. But despite being handled by experts, these funds can be risky as they're prone to market volatility.
A Systematic Transfer Plan (STP) in mutual funds allows you to maximise returns while managing risk effectively. It offers a balanced approach to wealth creation and asset allocation. In this comprehensive guide, we'll understand STP investments and list the top ten mutual funds for STP investments.
STP is a systematic investment strategy that allows you to transfer a fixed amount of funds from one mutual fund to another. It is an excellent strategy if you are looking to diversify your portfolio or manage market risk effectively.
For example, suppose you have Rs. 1 lakh and want to invest it in an equity scheme. However, since equities can be risky, you don't wish to invest the entire lump sum. In this case, you can invest this lump sum amount in a debt fund and opt for a Systematic Transfer Plan (STP).
With this plan, you can regularly transfer a fixed amount from the debt fund to the equity scheme. This prevents your money from being exposed to high equity risk at once and allows you to regularly invest in the equity market.
With multiple investment options in the market, identifying the best STP mutual funds that align with your financial objectives can often be difficult. To help you get started, here is a list of the best debt funds for STP that you can consider:
This short-term mutual fund scheme was launched in January 2013. With an expense ratio of 0.6% and Rs. 93 crores worth of assets under management, the Bank of India Short Term Income Fund Direct-Growth scheme has delivered impressive average annual returns of 6.58% since its launch. You can invest in this MF scheme with a minimum lump sum of Rs. 5,000.
Launched in February 2022, this direct growth scheme has Rs. 2,484 crores worth of assets under management and an expense ratio of 0.2%. The Kotak Nifty SDL Apr 2032 Top 12 Equal Weight Index Fund has delivered average annual returns of 5.30% since its launch. You can invest in this MF scheme with a minimum lump sum of Rs. 100.
The SBI Magnum Medium Duration Fund Direct-Growth was launched in January 2013 and has Rs. 7,043 crores worth of assets under management. It is a mid-duration scheme with an expense ratio of 0.65% and has delivered average annual returns of 9.02% since its launch. You can invest in this MF scheme with a minimum lump sum of Rs. 5,000.
This target maturity MF scheme was launched in October 2022. It is a medium-sized fund with an expense ratio of 0.2% and Rs. 851 crores worth of assets under management. The ICICI Prudential Nifty SDL Dec 2028 Index Fund Direct-Growth has delivered average annual returns of 8.00% since its launch. You can invest in this MF scheme with a minimum lump sum of Rs. 1,000.
Launched in 2015, this medium-duration MF scheme has Rs. 688 crores worth of assets under management with an expense ratio of 0.4%. HSBC Medium Duration Fund Direct-Growth has delivered average annual returns of 7.73% since its launch. You can invest in this MF scheme with a minimum lump sum of Rs. 5,000.
BHARAT Bond FOF - April 2031 is another direct growth debt mutual fund launched in July 2020. It is a medium-sized fund with Rs. 4,469 crores worth of assets under management and an expense ratio of 0.06%. The scheme has delivered average annual returns of 4.60% since its launch. You can invest in this MF scheme with a minimum lump sum of Rs. 1,000.
The BHARAT Bond ETF FOF - April 2032 Direct-Growth was launched in December 2021. It is a medium-sized MF scheme with an expense ratio of 0.06% and Rs. 4,178 crores worth of assets under management. The debt FoF mutual fund has delivered average annual returns of 4.48% since its launch. You can invest in this MF scheme with a minimum lump sum of Rs. 1,000.
The SBI Magnum Income Direct Plan-Growth was launched in January 2013. It is a medium to long-duration MF scheme with an expense ratio of 0.8% and Rs. 1,678 crores worth of assets under management. The SBI Magnum Income Fund has delivered average annual returns of 8.10% since its launch. You can invest in this MF scheme with a minimum lump sum of Rs. 5,000.
This is another target maturity mutual fund launched in September 2022. It is a medium-sized fund with Rs. 805 crores worth of assets under management and an expense ratio of 0.18%. Since its launch, the fund has delivered average annual returns of 8.45%. You can invest in this MF scheme with a minimum lump sum of Rs. 5,000.
This short-duration MF scheme was launched in January 2013. The ICICI Prudential Short Term Fund Direct Plan-Growth has a whopping Rs. 18,689 crores worth of assets under management and an expense ratio of 0.4%. It has delivered average annual returns of 8.53% since its launch. You can invest in this MF scheme with a minimum lump sum of Rs. 5,000.
Additional Read: Types of Mutual Funds in India
A Systematic Transfer Plan (STP) is an investment strategy where an investor gradually transfers a fixed amount from one mutual fund to another within the same fund family.
It involves transferring money from one fund to another to benefit from both stability and growth. The transfers occur at regular intervals, such as monthly or quarterly, reducing the risk of market timing and allowing the investor to take advantage of both debt and equity market opportunities.
STP is ideal for individuals who want to generate higher returns on limited resources and want to invest in safer securities like debt instruments.
Before opting for an STP, here are a few important considerations:
These 10 debt funds are excellent options for starting an STP in mutual funds. Investing in them and transferring small amounts to equity funds periodically will help you create wealth sustainably and achieve financial stability.
Visit the Tata Capital Moneyfy website to know more or download the Moneyfy's mutual fund investment App and start your STP investment today.
A Systematic Transfer Plan (STP) helps manage volatility by transferring a fixed amount from one mutual fund, typically a high risk fund (like equity) to a another, safer fund (like debt) over time, reducing the impact of market fluctuations.
STP and SIP serve different purposes. STP is useful for transferring lump sum investments to manage risk, while SIP is ideal for regular, disciplined investing. STP can help mitigate market volatility, while SIP ensures consistency.
An STP is good for investors as it offers a structured way to move funds from high-risk to low-risk investments, mitigating market volatility while offering flexibility and potential for long-term returns.
STP stands for Systematic Transfer Plan, a strategy where investors transfer a fixed amount regularly from one mutual fund (typically a high-risk fund) to another (a safer fund).
The benefits of STP include reduced risk by averaging out market entry points, systematic gradual investments, and a disciplined approach to reallocating investments over time.
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12 December 2024
8 mins read
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