What is the Difference Between SIP, STP and SWP?2020

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Not only incomplete knowledge of SIP, SWP, STP is also important to understand before investing.

#SIP stands for(Systematic Investment Plan)

#STP stands for (Systematic Transfer Plan)

#SWP stands for(Systematic Withdrawal Plan)

 SIP, STP and SWP, often you must have heard or read this name while referring to mutual fund investment, most people just assume that by knowing SIP, their investment knowledge is complete.  While it is also very important to know about STP and SWP.  Because you can take full advantage of SIP only if you know about SWP, STP also.  So let us explain in a very easy language what is SIP, SWP and STP.  When and how do you use them?  

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What is SIP? Meaning of SIP?

SIP stands for(Systematic Investment Plan),  A fixed amount when you deposit at a fixed interval (every month / quarter) in a mutual fund, it is called SIP (Systematic Investment).  You can start SIP with 500 rupees.  SIP is that investment weapon that protects your investment to a great extent by the manipulation of the market.  If you do not have much knowledge of the stock market or do not have time to track the market, then SIP can be a good option for investment.

SIP is a systematic way of investing your money in mutual funds. You can invest every month or quarter or year, it depends on the plan you have chosen. It encourages investors to save money and in the end, they can redeem better returns. 

A few features of SIP are- investors don’t have time to keep an eye on market and hence can pour in money into SIP. In SIP, one can also get the benefits of compounding i.e., you can reinvest the interest earned from the SIP. In the long run, it can make a huge positive impact on your returns.

How to Investment in SIP?

The purpose of SIP is to achieve the financial goals of your life, for example, if you have to take home, get a car or collect money for the education of children.  So SIP can be the best investment option for you.  The most important thing about SIP is that in this you get compounding benefits, that is, the longer you invest, the more money you can make.  Therefore, all experts also recommend that you start SIP as soon as possible.  For this, it is not necessary that you have a lot of money only then you invest, with 500 rupees you can start investing in it, then with increasing income gradually, SIP can also be increased. 

What is STP? Meaning of STP?

STP stands for (Systematic Transfer Plan), If you get a lot of money outright, and you do not want to put this money in the market together, because there is risk in it.  Then STP may be a better option for you.  In this, you have to keep all money in liquid fund or debt fund of a fund house.  After this, the same money is transferred to the equity fund of the same fund house through STP at a regular interval.

 STP is an automated way of moving (transferring) money from one mutual fund to another. This plan is chosen when one wants to invest a lump sum amount but wants to avoid the marketing-timing risk. The most common and sensical way of doing STP is to transfer money from a debt fund to an equity fund.

How to Investment in STP?

The minimum STP amount depends on the fund scheme and the fund.  Through STP, you divide your money into several schemes.  This has two advantages, first is that you get good returns on the money being invested in equity funds, and secondly your lump sum money kept in debt funds is also safe.

STP can also be done from equity to debt.  This should be done when you are very close to your goal.  This reduces the risk on your investment.  Therefore, gradually your investment should be shifted from equity to debt.

What is SWP? Meaning of SWP?

SWP stands for(Systematic Withdrawal Plan), As the name suggests, SWP is exactly the opposite of SIP.  In this, you withdraw a fixed amount from your fund account at a fixed interval.  You can start it when you have at least 25,000 rupees in your mutual fund account.  You first put lump sums in a mutual fund scheme, then withdraw (SWP).  You can do this withdrawal monthly or quarterly.  

SWP allows you to withdraw any amount of money from a mutual fund whenever you want. Funds are generally withdrawn either to re balance the existing portfolio by investing in other funds or for meeting personal expenses. SWP is somewhat the reverse of SIP. If you invest lump sum in a mutual fund, you can set an amount you’ll withdraw regularly and the frequency at which you’ll withdraw.

Generally (SWP) is used at the time of retirement.  This is a kind of self-designed pension.  But you can use it even if you do not have any other means of earning.  As has happened to many people during the Corona crisis.

2 thoughts on “What is the Difference Between SIP, STP and SWP?2020”

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