Systematic Transfer Plan ICICI

What is the ICICI Prudential Systematic Transfer Plan?

ICICI Prudential offers investors the facility to transfer their funds from one mutual fund to another under their systematic transfer plan, provided that both schemes are part of ICICI Prudential Mutual Funds. This facility allows for a fixed or variable amount transfer at predefined periods throughout the investment horizon. ICICI Prudential provides investors with a standard STP option and a Booster STP option.

ICICI Standard STP

• Source of Transfer: Unlike a Systematic Investment Plan (SIP), which transfers funds directly from the bank account of the customer, an STP transfers funds from a pre-existing mutual fund investment.
• Source and target: Source refers to the investment which already has an existing investment, while target refers to the mutual fund that acts as the destination of the redirected investment. Target funds, therefore, are the final destination of the investment withdrawn from the source fund. Generally, liquid or debt funds act as the source fund and equity funds act as the target fund of an STP. However, investments can be redirected as per the goals of the investor.
• Fixed Parameters: A standard STP has fixed parameters such as a fixed amount transferable investment and the date of transfer.
• Standing Instructions: The investor provides the Asset Management Company with instructions to redeem units from the source mutual fund and buy units in the target mutual fund on a periodic basis.

Key benefits of ICICI Standard STP

The key benefits of a standard STP include

• Rupee cost averaging: By transferring a fixed amount of money periodically and not at once, the investors allow their fixed investment to buy more units when the NAV is low and fewer units when the NAV is high. This decreases the average cost of units in the long run.
• Dual Returns: The remaining money in the source fund keeps accumulating returns while the target fund is doing the same simultaneously.
• Rebalancing the portfolio: A standard STP is a systematic tool to rebalance your portfolio and redirect your funds towards funds that align with your investment goals and risk profile.

ICICI Booster STP

Booster STP is an enhanced version of standard STP, which allows investors to transfer different amounts of money from one fund to another fund at fixed intervals of time according to market valuations. Investors need to provide a base amount to start the investment.

• Equity Valuation Index(EVI): A proprietary index is used to assess market valuations. EVI relies on four key factors to assess the same. These factors are used to categorise the market into expensive and reasonable markets.
• Price to earnings: the cost of profits.
• Price to book: the difference between the actual value of the company's shares and the market value.
• G-Sec × P/E: Comparison between government bonds and the shares
• Market Cap to GDP: Value of the stock market as compared to that of the economy.
• Variable Multiplier: A variable multiplier uses the information provided by the EVI and applies a multiplier to your base instalment amount. When valuations are high, the multiplier invests as low as 0.1x of your base amount. However, when the market is low, it can invest up to 10x your base amount.
• Variable Time horizon: Since the investment amount changes with the EVI, the total deployment time of your entire investment can vary as per the market situation.
• Target amount: Investors need to provide a target amount. The STP will keep running until that target amount is reached or Dec 31 2099, whichever comes first.

Key Benefits of ICICI Booster STP

• Strategic allocation: The multiplier invests heavily in the target fund when market conditions are favourable to higher returns. EVI and the variable multiplier allow it to read market conditions and invest accordingly.
• Risk Management: Booster STP has historically displayed fewer drawdowns than standard STP during market dips. It buys more units when the market is cheaper, and refrains from buying more units if the market is expensive. Difference Between ICICI Prudential Standard STP and Booster STP

Different Source and Target Funds

The following table lists some of the sources and transfer schemes provided by ICICI Prudential mutual funds:

How to Set Up an ICICI Prudential STP

Log in to the ICICI Prudential Mutual Fund portal.

Standard STP

• Choose the source and the target scheme
• Enter the amount that you wish to be transferred periodically
• Select a fixed period for the investment.
• Provide automated instructions to the AMC to process transfers until the STP reaches its tenure or the units in the source are exhausted.

Booster STP

• Choose from the available open-ended schemes
• Set a minimum base amount. Minimum base amount is ₹1000
• Choose a trigger value range which determines the multiplier range of how much the base instalment can vary. The default is set to 0.1x to 5x
• Specify the target amount. This step is optional. The STP will continue running until your target amount is met or till Dec 31 2099.

Conclusion

The ICICI Prudential STP provides investors with a systematic plan to redirect their investments from one asset to another based on their future goals and risk tolerance. It doesn't require any extra investment from the investor's end, who can choose between a standard STP and a booster STP as per their requirements to build a healthy corpus.