What is the STP?
A Systematic Transfer Plan is the disciplined way to deploy a lumpsum. The money sits in a low-risk liquid or ultra-short fund earning 6–7%, and a fixed amount moves into your chosen equity fund every month. You get rupee-cost averaging on the way in without the cash lying idle.
It is the standard recommendation after a bonus, property sale, maturity payout or any windfall you are nervous about investing all at once.
Formula & worked example
Two balances compound at different rates while money moves between them:
Target = (Target + transfer) × (1 + iequity)
Worked example: ₹15,00,000 transferred over 18 months, liquid at 6.5% and equity at 12%, total horizon 10 years. The final value lands near ₹43.2 lakh versus about ₹46.6 lakh if invested directly in equity on day one — the gap is the price of the smoother entry.
How to use this stp calculator
- Enter the lumpsum and pick a transfer window — 6 to 18 months is typical.
- Use a realistic liquid return (6–7%) and equity return (10–12%).
- Set the full horizon, which should be well beyond the transfer window.
- Compare against "If Invested Directly" to see what the smoothing costs.
Smart tips
- Both funds should be from the same fund house — most STPs only work within one AMC.
- Each transfer is a redemption from the liquid fund and is taxable, though gains there are usually small.
- A 6–12 month STP captures most of the risk reduction. Stretching to 3 years mainly sacrifices returns.
- For horizons under 3 years, skip the STP entirely and stay in debt — equity is not appropriate.
Frequently asked questions
What is the difference between STP and SIP?
A SIP invests fresh money from your income. An STP moves money you already have from one fund to another, so the waiting portion keeps earning.
Is STP taxable?
Yes. Each transfer counts as a redemption from the source fund, so any gain there is taxed. With liquid funds the gains are modest, making the tax small.
How long should an STP run?
Six to eighteen months suits most cases. Longer windows reduce volatility slightly but give up meaningful equity compounding.
Is STP better than investing a lumpsum directly?
It usually earns a little less but protects against terrible timing. Choose it if a 20% fall right after investing would push you to sell.
Want the theory behind the numbers? Read our STP guides on the Money Blog.