The transfer by an investor of his funds, either in whole or in part, from one scheme to another scheme, where both the schemes are managed by the same Asset Management Company (AMC) is known as switching. The change of option between dividend and growth within a scheme is also considered as switching.
How to Switch?
The investor should fill up a transaction slip, either online or offline, indicating clearly the source fund and the number of units which he wishes to transfer and the target fund into which he wishes to transfer the units. Such switches are one-time or single transaction requests
A Systematic Transfer Plan (STP) also involves switching of units from either a debt fund or a liquid fund to an equity fund on predetermined dates. The STP switches are multiple occurrences until the switch instructions are countermanded by the investor or the specific amount or number of units are transferred.
Triggers are also a mode of switching units from one scheme to another. The trigger may be an event such as target NAV being achieved.
Cost of Switching
There is no cost for switching for a specific number of switches in a year. However, if the switch transaction is opted for within a period of less than months from the date of purchase of the units in the source scheme, an exit load may be chargeable.
Lovely article !!! I did not know that we can actually switch our mutual fund from one scheme to another within same asset management group.Also it is amazing that we can actually switch from debt to equity with STP arrangement without any additional switching costs !!!! STP and triggers may prove as a boon if investors can time the entry & exit at appropriate times. Keep posting !!!