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STP Calculator
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What is a STP calculator?
STP stands for Systematic Transfer Plan, which is a feature offered by mutual funds that allows investors to transfer a fixed amount of money from one mutual fund scheme to another, in a systematic and periodic manner.
An STP calculator is a financial tool that helps investors determine the amount of money they should transfer from one mutual fund scheme to another, through the STP feature. It typically works by taking inputs from the investor and then calculating the amount that needs to be transferred periodically, based on the selected STP duration and the rate of return of the target scheme.
Using an STP calculator can help investors plan their investments better and optimize their investment returns by selecting the right STP duration and target scheme based on their financial goals and risk appetite.
How does the STP calculator work?
An STP calculator works by considering various factors that impact the calculation of the amount to be transferred from one mutual fund scheme to another. It considers the source scheme, target scheme, initial investment, investment period, frequency of transfer, STP start and end date and so on. Based on these inputs, an STP calculator estimates the returns that you can expect from the scheme.
For example:Hari is a 25-year-old who invested Rs. 1,20,000 in two mutual fund schemes, a debt fund and an equity fund.
He decided to use an STP plan to invest ₹10,000 per month for 12 months.
He chose a debt fund with an NAV of ₹50 and an equity fund with an NAV of ₹100. Hari then used an STP calculator to calculate how many units he would receive for each transfer based on the NAV of the mutual fund schemes he selected.
In the first month, Hari's transfer of ₹10,000 bought him 200 units of the debt fund (200 units = ₹10,000/NAV of ₹50) and 100 units of the equity fund (100 units = ₹10,000/NAV of ₹100).
At the end of the 12 months, he had invested a total of ₹1,20,000 - ₹60,000 in the debt fund and ₹60,000 in the equity fund.
The return on investment for each mutual fund scheme depends on its performance over the 12-month period. If the NAV of the debt fund increased to ₹55 and the NAV of the equity fund increased to ₹120, Hari's investment was worth ₹1,41,000 (₹66,000 in the debt fund and ₹75,000 in the equity fund), giving him a profit of ₹21,000.
Advantages of STP calculator
Simple and convenient
The STP calculator is incredibly easy to use, making it accessible to investors of all levels of expertise. It saves users valuable time by swiftly calculating values, eliminating the need for manual, time-consuming calculations. This allows investors to focus on their financial plans.
Accuracy
The calculator's speedy computation ensures precise results, aiding users in making informed investment decisions.
Efficient Planning
By using the STP calculator, investors can efficiently plan their investments. They can create comprehensive financial strategies based on the tool's insights and even explore different scenarios to determine the most suitable investment options.
Historical Insights
Users can leverage the calculator to gain a historical perspective on how STP has benefited investors in the past. It demonstrates how STP takes advantage of target scheme NAV (Net Asset Value) volatility, allowing for rupee cost averaging and potentially boosting returns.
Continuous Returns
The calculator also illustrates how the source scheme continues to earn returns for investors throughout STP's tenure. This insight empowers investors to make informed decisions and potentially acquire additional units of the target scheme.Related Calculators
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How can I start an STP?
To start an STP, you need to first invest in a mutual fund scheme and then select a target scheme where you want to transfer the funds. You can then set up the STP by specifying the amount and frequency of the transfers.
What are the types of STP available?
There are two types of STP available - fixed STP and capital appreciation STP. In a fixed STP, a fixed amount is transferred from one scheme to another at regular intervals. In a capital appreciation STP, the transfer is made based on the market conditions and the capital appreciation of the source scheme.
Why should one invest through STP?
STP can be an effective investment strategy as it allows for regular investments in mutual funds while minimizing the risk of market volatility. It also helps investors benefit from market movements by investing in different schemes at different times.
What is the minimum duration for an STP?
The minimum duration for an STP is typically six months. However, this may vary depending on the mutual fund scheme and the target scheme.
What is the difference between STP and SIP?
While both STP and SIP involve regular investments in mutual funds, the key difference is in the way the investments are made. In an SIP, a fixed amount is invested in a mutual fund scheme at regular intervals. In an STP, a fixed amount is transferred from one scheme to another at regular intervals.
What is the key benefit of STP?
The key benefit of STP is that it allows investors to benefit from market movements by investing in different schemes at different times. It also helps minimize the risk of market volatility by spreading investments over a period of time.
Can an STP calculator be used for all mutual fund schemes?
Yes, an STP calculator can be used for all mutual fund schemes that offer the STP investment option
Can an STP calculator be used for lumpsum investments?
No, an STP calculator is specifically designed for Systematic Transfer Plans (STP) which involve periodic transfers from one mutual fund scheme to another. For lump sum investments, you may our lump sum calculator.
How often should I use an STP calculator?
It is recommended to use an STP calculator whenever you are considering an STP investment or if you want to check the progress of your existing STP investments. You may use it periodically to adjust your transfer amount or frequency based on your investment goals and market conditions.
The information provided on this page is for educational purposes only and should not be considered as financial advice. Past performance is not indicative of future results. Always consult with a financial advisor before making any investment decisions. Mutual fund investments are subject to market risks; please read all scheme-related documents carefully.
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