While the stock market is at in its heights, investment in equity mutual funds altogether is not welcomed. Thus most of the investors are depending on Systematic Investment Plan(SIP). Most of the investors are unknown about the much more profitable way of Systematic Transfer Plan.

Systematic Transfer Plan is the transferring of a fixed sum from a fund of one mutual fund Company to another fund daily, weekly, fortnightly, monthly, once in 3 months, half yearly or yearly. Transferring can be done from any fund to another fund.

Case Study: Consider an investor invested about 1 lakh Rs in a liquid fund of a mutual fund Company which are DET funds that invest in short term debentures. A sum of Rs 10,000 is transferred in each month to an equity fund of the same company. This scheme has two advantages that’s, the investment can be done in similar way as in SIP and return can be obtained for the investment in liquid fund. The return from the liquid funds is around 5-7 %. In the mean time the investments in a savings account can yield only about 3.5 % per annum.

Fund transfer from equity funds is also possible by the systematic transfer plan. Consider the case that you had made an investment in a diversified equity fund and you need to avail tax benefit through investment in equity linked savings scheme. In this case you can transfer fund using the systematic transfer plan.

The minimum amount that can be transferred using the systematic transfer plan is Rs 500. Whereas in the case of daily transaction it is Rs 50. Similar limits are also set in the case of daily investments in liquid funds too.

The charges which are applicable to the mutual funds only are applicable for the systematic investment plan too. No charges are there for the buying and selling of units in DET funds. So no charges are there for investment and money transactions in liquid fund. Even though there is no charge for buying units in equity funds, if they are sold within a year 1% is levied as exit load. That’s if fund transfer occurs via systematic investment plan within one year of investment in equity fund, exit load of 1% I applicable.