Total Transferred Amount
₹ 3,60,000
Source Fund Final Value
₹ 1,74,250
Target Fund Final Value
₹ 4,32,150
Total Portfolio Value
₹ 6,06,400
About the Systematic Transfer Plan (STP) Calculator
Our free STP Calculator helps investors evaluate capital movement strategies by systematically transferring fixed amounts from a conservative source fund into an aggressive target fund.
1. STP Mathematical Formula
The monthly balance evolution for both source and target funds under a Systematic Transfer Plan is computed iteratively as:
Source Balancem = (Source Balancem−1 − Transfer) × (1 + Rsource / 1200)
Target Balancem = (Target Balancem−1 + Transfer) × (1 + Rtarget / 1200)
Where the defined variables are:
- m: Current month index of the transfer schedule.
- Transfer: Fixed monthly tranche amount moved from the source to the target fund.
- Rsource / Rtarget: Expected annual return rates (%) for the source and target funds respectively.
- Source/Target Balances: Respective fund values after monthly appreciation and capital transfer.
2. Practical Worked Example
Let us review a realistic STP deployment scenario:
- Initial Investment in Source Fund: ₹5,00,000
- Monthly Transfer Amount: ₹10,000
- Source Fund Annual Return Rate: 7% per annum
- Target Fund Annual Return Rate: 12% per annum
- Time Period: 3 years (36 months)
Calculation Breakdown:
- Total Cumulative Transferred Amount over 36 months = ₹10,000 × 36 = ₹3,60,000
- Source Fund Final Remaining Value (compounding at 7% while shedding monthly tranches) $\approx$ ₹1,74,250
- Target Fund Final Accumulated Value (compounding incoming tranches at 12%) $\approx$ ₹4,32,150
- Total Combined Portfolio Final Value = ₹1,74,250 + ₹4,32,150 = ₹6,06,400
By leveraging an STP, your core capital continues generating returns in a stable source fund while systematically entering target equities over time!
3. Frequently Asked Questions (FAQs)
1. What are the main benefits of using an STP?
An STP helps mitigate market volatility through rupee-cost averaging in equity funds while ensuring your idle cash earns returns in a secure debt or liquid fund rather than sitting in a low-yield savings account.
2. Are there tax implications when transferring via STP?
Yes, each transfer from the source fund is treated as a redemption (withdrawal), meaning capital gains tax rules apply depending on whether the source fund is debt or equity and your holding period.
3. Can an STP be stopped or modified midway?
Yes, most mutual fund houses permit investors to modify transfer amounts, change target funds, or cancel an active STP at any time without exit load penalties (after completing any applicable lock-in or minimum holding periods).
4. What is the difference between STP and SIP?
A SIP involves bringing fresh savings from your bank account into a mutual fund monthly, whereas an STP involves moving an existing lump-sum corpus from one fund to another within the same fund house.
5. Which funds are best suited as source funds for STP?
Liquid funds, overnight funds, or ultra-short-duration debt funds are ideal source funds due to high liquidity, low volatility, and stable capital protection.
6. Is there a minimum amount requirement for STP?
Yes, mutual fund houses usually mandate a minimum initial lump-sum deposit and minimum monthly transfer amounts (typically starting around ₹500 to ₹1,000 per transfer tranche).
7. Are target fund returns guaranteed under an STP?
No, target funds are typically equity-oriented or hybrid schemes subject to market risks, meaning projected return rates are estimates rather than guaranteed outcomes.
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