# STP Calculator – Mutual Fund Systematic Transfer Plan Calculator

STP is an investment route in mutual funds just like SIP. However, how the initial and subsequent investments are made differs for both. An STP mutual fund calculator helps in calculating the wealth gained from an STP investment.

## What is Systematic Transfer Plan (STP)?

Systematic Transfer Plan is a disciplined way of investing similar to Systematic Investment Plan (SIP). However, there is a difference between the two. In Mutual fund STP, one invests lump-sum amount in a mutual fund. The same is transferred to a target scheme systematically. In the Systematic Investment Plan, the investors have to invest a fixed amount every month from their savings account.

In STP, the investment amount is transferred from one mutual fund scheme to a target mutual fund scheme. The transfer is done between two mutual funds within the same fund house. Also, the transfer is done periodically, for example, every month.

Investors usually transfer from a debt fund to an equity fund. They source their equity mutual fund SIP with their debt fund investment. This happens when the investor has a lump sum amount to invest, and he/she prefers investing in a liquid fund to earn higher returns than a savings bank account. However, at the same time, they can take advantage of investing systematically in an equity fund and reduce their average cost of investing.

Related Calculators

## How does Systematic Transfer Plan work?

A Systematic Transfer Plan (STP) transfers a fixed amount of money from one fund to another. An investor, while investing in a mutual fund scheme through STP, has to choose the fund in which he/she will initially invest the lump sum money. Then they have to select the fund to which the money has to be transferred. They also have to choose the amount and the date of transfer.

Once the investors invest the lump sum amount, he/she need not worry about the transfer. The fund house will take care of the transfer of money from one fund to another.

## Who should invest through an STP?

Systematic Transfer Plan STP is ideal for investors who are looking to invest lump sum amounts, but are not ready to do it all at once. It could be either because of their risk tolerance levels or because they are worried about market volatility. Therefore, investors can invest in liquid mutual funds or debt mutual funds and transfer the funds regularly to equity schemes. As a result, investors can get fixed returns from debt funds and potential returns from the equity investment.

## What is an STP Calculator?

An STP return calculator helps in determining the future value of an investment when one opts for an STP from liquid mutual fund to equity mutual fund scheme. This mutual fund calculator requires one to input the following details:

• Investment Amount
• Tenure (months)
• Growth on Equity
• Growth on Liquid

Upon inputting the details, the mutual fund STP calculator determines the following:

1. STP amount per month: Based on the investment amount and tenure, the calculator determines the STP amount.
2. Future value of the investment: Future value is the value of the investment amount at the end of the tenure. The future value is the sum of the returns earned from the equity and debt investments.
3. Return on liquid investments: Determines the total return from liquid investments during the investment tenure.
4. Return on equity investments: Determines the total return from equity investments during the investment tenure.

## Advantages of STP calculator ?

Following are the benefits of using an STP return calculator.

• Easy to use: STP return calculator is very easy and simple to use.
• Time saving: The calculator computes the values instantly. This saves time for an investor. The investors need not perform the calculations manually. Instead, they can use the calculator to quickly calculate the results for the desired investment amount and tenure.
• Accurate results: The calculator computes the value fast and is very accurate.
• Better planning: This mutual fund calculator helps in planning investments. An investor can make financial plans based on the STP calculator and decide on the most suitable investment option. Also, investors can try out multiple scenarios to determine what scenario suits them best.
• Free to use: It is available online. Also, it is free to use.

## How does the Systematic Transfer Plan calculator work?

Scripbox’s STP mutual fund calculator is straightforward and easy to use. The calculator determines the future value of a mutual fund STP investment. One has to enter the following inputs to get the desired outputs.

The inputs in Scripbox’s calculator are:

• Investment Amount: This is the lump sum amount that one wants to invest in a liquid fund.
• Tenure: The tenure is the number of months one wants to transfer the money from one fund to the other.
• Growth on Equity: The expected growth (rate of return) on their investment in an equity mutual fund scheme.
• Growth on Liquid: The expected growth (rate of return) return on their investment in the liquid fund.

The calculator gives back the following outputs:

1. Investment: The initial investment amount of the investor.
2. Return on liquid fund investment: This gives how much their investment in the liquid fund has grown.
3. Return on Equity: This gives how much their investment in the equity mutual fund has grown.
4. STP per month: The calculator calculates the amount to be transferred into the equity mutual fund scheme based on the investment amount, tenure of the transfer and returns on the liquid fund.
5. Future value: This is the value of the initial investment amount on a future date (after all the STPs). It is calculated by adding the returns on equity and return on liquid.

Let’s take, for example, an investor Mr Jay who wants to invest a lump sum amount of INR 1,50,000 in a liquid fund. The return that he is expecting from it is 8%. He wants to do an STP into an equity mutual fund with a potential return of 13%.

He wants to transfer the investment into a liquid fund in 24 months. The calculator gives him the following outputs:

• Total Investment is 150,000
• Return on Liquid fund is INR 12,770.2
• Return on Equity fund is INR 160,590.9
• STP per month is INR 6,250.0
• Future Value is INR 173,361.1

The total investment of INR 1,50,000 of Mr Jay will be transferred to an equity mutual fund scheme in 24 months which will have a future value of INR 1,73,361.1 at the end of the 24 months.

## Benefits of an Systematic Transfer Plan

#### Rupee cost averaging

Systematic Transfer Plans average out the cost of investment. With STP, investors buy lesser units at higher NAV and higher units at a lesser NAV. Therefore, as the money keeps getting transferred from one fund to the other, an investor will benefit from rupee cost averaging. In other words, per unit cost of the investment would reduce over time.

#### Scope for higher returns

With STP, there is a potential to generate higher returns. In an STP, an investor would initially invest the money in a liquid fund or a debt fund. The returns from a liquid fund are higher when compared to a savings bank account. Therefore, by investing in a liquid fund, investors have a good potential to generate higher returns as opposed to holding the money in a savings bank account.

#### Consistent returns

Through STP, investors transfer money from one fund (debt or liquid fund) to an equity-oriented mutual fund. As a result, the investors earn returns from equity investments and at the same time are protected as part of their investment is in debt.

#### Manages risk

With STP, investors can manage risk by moving funds between high-risk investments to low-risk investments. For example, Mr Kumar invests for his retirement in an equity-oriented mutual fund through SIP. His investment tenure is 25 years. On nearing his retirement, Mr Kumar can choose to do an STP from his equity investments to a debt fund. This would help Mr Kumar in moving all his investments to a safer haven by the time of his retirement.

#### Rebalancing portfolio

STP helps in rebalancing the portfolio. In simple terms, if an investor wishes to transfer money from equity to debt or from debt to equity, they can easily do it through STP. In a scenario where the investor has too many funds in debt, they can reallocate them to equity. Similarly, in the case where they have too many funds in equity, through STP, they can reallocate the funds to debt.

## Features of a Systematic Transfer Plan

Following are the features of a Systematic Transfer Plan:

• Minimum amount: There is no minimum amount of investment for an STP. However, experts recommend an investment of INR 12,000.
• Frequency: The minimum number of transfers is six, which is mandatory for an STP investment.
• Entry and exit load: There is no entry on STP. However, there is an exit load which is capped at 2% by SEBI.
• Discipline: An STP allows investors to invest in mutual funds in a systematic manner inculcating discipline in investors to achieve financial goals.
• Tax: Tax is levied on redemptions. In STP, each transfer is considered as redemption. Tax rules of mutual funds apply to STP as well.

Once the investment from the liquid fund is transferred to an equity mutual fund, an STCG tax is levied on the STP amount. The gains are added to investors’ individual income and taxed at their slab rate.

Even with taxation on each STP, the returns from liquid funds are higher than FDs and bank savings accounts.

An STP allows investors to invest in mutual funds in a systematic manner inculcating discipline in investors to achieve financial goals. A Systematic Transfer Plan calculator calculates the wealth gained from an STP investment. STP is among the best ways to invest in mutual funds if one has a lump sum amount but wants to invest systematically in equity funds.