Mutual Funds, Dec. 16 -- If you are planning to exit one mutual fund scheme and reinvest the proceeds in another, you can opt for a systematic transfer plan (STP).

This is an effective mechanism for investors who want to circumvent market volatility and make the most of rupee cost averaging. For instance, you want to invest Rs.5 lakh in a mid-cap mutual fund, but you are not sure if this is the right time to enter the fund. So, what you plan - instead - is to lock your money in a debt mutual fund for the time being, and transfer Rs.50,000 every month from this fund to the mid-cap fund via STP in 10 equal tranches.

Through this way, you can buy multiple units of the mid-cap fund (target fund) at different price points by redeeming the de...