How the STP Calculator works
A Systematic Transfer Plan (STP) moves a fixed amount every month from a lower-risk source fund (often a debt or liquid fund) into a growth-oriented target fund (usually equity). It is a way to invest a lump sum into equity gradually instead of all at once, which spreads out your entry price. Both funds keep earning their own returns during the transfer.
How it is computed
Source = Source × (1 + iₛ) − Transfer
Target = Target × (1 + iₜ) + Transfer
- iₛ = Monthly return of the source fund (annual ÷ 12)
- iₜ = Monthly return of the target fund (annual ÷ 12)
- The transfer each month is capped at whatever is left in the source fund.
Worked example
Starting with ₹10,00,000 in a source fund earning 6% and transferring ₹25,000 a month into a target fund earning 12% for 3 years: you move ₹9,00,000 in total. By the end the target fund is worth about ₹10,76,922, roughly ₹2,13,278 remains in the source, and the combined value is about ₹12,90,200. The chart shows money steadily shifting from the source (shrinking) to the target (growing).
Things to keep in mind
- An STP works best when you expect the target (equity) fund to outperform the source over time; the source return is usually modest since it is a parking place.
- Returns are not guaranteed, and each transfer is treated as a redemption from the source fund, which can attract capital gains tax and (for some funds) an exit load.
- Spreading entry over many months reduces timing risk, but in a steadily rising market a one-time lump-sum investment can sometimes end up ahead — STP trades a bit of upside for lower risk.
