Shweta Jain explains what is STP, the best timeframe & tax requirements

economictimes.indiatimes.com:

Shweta Jain, Founder, Investography, says “if somebody is looking at an investment for a long-term horizon, you do not look at it saying, okay, which liquid fund is the best and I will move money from there. You see which equity fund suits you, whether it is a largecap fund, whether it is a passive fund, whether it is a smallcap fund, whatever the fund may be. Once you have chosen your scheme and in that same AMC, you choose a liquid fund because that is the one where there will be the least amount of risk.”
Let us talk about systematic transfer plans (STPs). Where did the idea come from? A lot of investors are either timing the market, or not investing thinking they need a lot of money.
The thought is quite simple. It is like an SIP but for somebody who does not have a regular monthly income coming in as salary like for example, a businessman or an entrepreneur or a freelancer. They do not have regular money coming in but might have lump-sum amounts coming in. What do they do then? Should they invest when they have the money? How do they stagger it so that the rupee cost averaging works for them?

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So, that is the whole thought process behind STP. It is an SIP for somebody who does not have the regular inflow like a salary. It is a very simple process. You invest lump-sum money that you have in, say, a liquid fund and from that fund, you give instructions for an STP, a systematic transfer plan to get into an equity fund. So, you get the advantage of your rupee cost