fbpx

Often people get confused with the three terms, SIP, STP, and SWP, and end up using interchangeably due to the lack of knowledge. So, in this blog, we seek to discuss what is the difference between the STP, SIP, and SWP so that the investors use it diligently.

Systematic Investment Plan (SIP)

SIP is a systematic approach or way of investing in mutual funds. In this, an investor invests every month or quarter or year depending as per their comfort. So, here are some of the features of a SIP:

  • No need to keep an eye on the market conditions
  • Provides the benefit of compounding of money
  • Offers benefits of rupee cost averaging
  • No lots of paperwork
  • The auto-debit facility from the fund houses

Systematic Withdrawal Plans (SWP)

SWP allows withdrawing money from mutual funds or MF systematically at a regular period of interval. Most of the time investors look for the SWP to either re-balance an existing portfolio or for meeting any expense or exigency.

Moreover, in simple words, you may also consider SWP to be the opposite of the SIP. Furthermore, in SIP, while you invest money systematically, in SWP, you withdraw money systematically.

Systematic Transfer Plan (STP)

STP or Systematic Transfer Plan is a way of automatically moving out money from one fund to another. This plan is generally used when an investor is looking to invest a lump sum amount for the short term before making the final allocation. For example, assume you have received your bonus payment from your employer in the month of December or November, and you are looking to invest the sum in your equity funds for around 5-7 years. Before choosing the funds and making the allocation, you should invest the amount in the liquid fund. This helps you to make sure that your funds are not lying idle at a 3-4% interest rate in the savings account.

After investing in the liquid fund, you may finalize the equity funds and opt for the STP from liquid funds to equity funds over 6-12 months. This way, you will be able to shield yourself from market timing while also getting the benefit of 7-9% returns for the funds lying idle.

What is the different between SIP, SWP and STP?

60,723,169 views
What is Lorem Ipsum? Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry’s standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries, but also the leap into electronic typesetting, remaining essentially unchanged. It was popularised in the 1960s with the release of Letraset sheets containing Lorem Ipsum passages, and more recently with desktop publishing software like Aldus PageMaker including versions of Lorem Ipsum.

Why do we use it? It is a long-established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem Ipsum will uncover many websites still in their infancy. Various versions have evolved over the years, sometimes by accident, sometimes on purpose (injected humour and the like).

Where does it come from? Contrary to popular belief, Lorem Ipsum is not simply random text. It has roots in a piece of classical Latin literature from 45 BC, making it over 2000 years old. Richard McClintock, a Latin professor at Hampden-Sydney College in Virginia, looked up one of the more obscure Latin words, consectetur, from a Lorem Ipsum passage, and going through the cites of the word in classical literature, discovered the undoubtable source. Lorem Ipsum comes from sections 1.10.32 and 1.10.33 of “de Finibus Bonorum et Malorum” (The Extremes of Good and Evil) by Cicero, written in 45 BC. This book is a treatise on the theory of ethics, very popular during the Renaissance. The first line of Lorem Ipsum, “Lorem ipsum dolor sit amet..”, comes from a line in section 1.10.32.

The standard chunk of Lorem Ipsum used since the 1500s is reproduced below for those interested. Sections 1.10.32 and 1.10.33 from “de Finibus Bonorum et Malorum” by Cicero are also reproduced in their exact original form, accompanied by English versions from the 1914 translation by H. Rackham.

No posts found!