The Best STP Mutual Funds for Diversified Investment Strategies

Are you looking to diversify your investment portfolio and mitigate risks through the Systematic Transfer Plan (STP)? This article will guide you through the top STP mutual funds available from prominent asset management companies in the Indian market. We will explore the features, benefits, and tax implications of these funds, helping you make an informed decision.

Understanding Systematic Transfer Plan (STP)

A Systematic Transfer Plan (STP) is a strategic investment tool that allows investors to systematically transfer funds from one mutual fund scheme to another on a regular basis. The transfer can be from a debt fund to an equity fund, or vice versa, to ensure a balanced and diversified investment portfolio.

Features of an STP Mutual Fund

Here are the key features of an STP mutual fund:

1. Minimum Investment

There is no standardized minimum investment amount required for initiating an STP. However, some AMCs (Asset Management Companies) may stipulate a minimum investment of Rs. 12,000 for their STP schemes.

2. Entry and Exit Load

When initiating an STP, you are exempt from entry load if you make at least six capital transfers. However, an exit load may be charged, which can range up to a maximum of 2% as per SEBI (Securities and Exchange Board of India) guidelines. The exit load is usually based on the investment tenure and the type of fund.

3. Disciplined and Lucrative Strategy

STP provides a disciplined and strategic approach to wealth management. Investors often start by transferring funds from a debt fund to an equity fund, thereby balancing their portfolio and optimizing returns.

4. Taxation on STPs

While STP is a valuable tool, it is essential to be aware of the tax implications. Each transfer is considered a redemption followed by a fresh investment. Hence, the redemption is usually taxable.

For transfers made within the first three years from a debt fund, a Short-Term Capital Gains Tax (STCG) may apply, albeit the overall returns are generally higher than those in a bank account. Investors should always consult with a financial advisor to understand their specific tax obligations.

Top STP Mutual Funds

Let's delve into the top STP mutual funds from some of India's leading AMCs.

1. SBI AMC - SBI Ultra Short Duration Fund to SIPs

SBI AMC offers a range of options for investors through STP. The SBI Ultra Short Duration Fund can be the source fund, with subsequent transfers to other SBI schemes like:

SBI Focused Equity Fund SBI Bluechip Fund SBI Multicap Fund SBI Smallcap Fund SBI Hybrid Equity Fund

An STP from the Ultra Short Duration Fund to these equity/s hybrid funds can provide a seamless shift from low-risk to high-risk sectors, optimizing wealth over time.

2. Mirae Asset AMC - Mirae Cash Management Fund to SIPs

Mirae Asset AMC offers innovative STP options, such as transferring from the Mirae Cash Management Fund to equity-oriented schemes like:

Mirae Largecap Fund Mirae Bluechip Fund Mirae Tax Saver Fund Mirae Hybrid Equity Fund

This strategy leverages cash management for optimal liquidity while allowing systematic transfers to more growth-oriented funds.

3. Axis AMC - Axis Liquid Fund to SIPs

Axam AMC presents a comprehensive STP framework, enabling transfers from the Axam Liquid Fund to other Axis schemes such as:

Axam Bluechip Fund Axam Focused 25 Fund Axam Long Term Equity Fund Axam Midcap Fund Axam Multicap Fund Axam Smallcap Fund

With an STP from the Liquid Fund, investors can benefit from a diversified portfolio, systematically moving from low risk to higher risk funds as per their investment goals.

Conclusion

Systematic Transfer Plans (STPs) are a powerful tool in a well-diversified investment strategy. By understanding the features, benefits, and tax implications of STP mutual funds, investors can maximize their returns and minimize risks. Whether you choose an SBI, Mirae Asset, or Axis AMC fund, ensure that your investment aligns with your overall financial goals.

Remember to consult with a financial advisor to tailor an STP strategy that meets your unique needs and objectives. By strategically transferring funds, you can navigate the complexities of the investment market and achieve long-term financial success.