SIP vs SWP vs STP: Nowadays everyone is busy in increasing money, and as soon as the name of mutual funds comes, many people get confused between SIP, SWP and STP. If you also do not know what these three are, what is the difference between them, and which one will benefit the most? So it is very easy to understand.
These three are tools of mutual funds, which are made for different needs. First of all, if we talk about SIP, it means Systematic Investment Plan. This is a method where you put a small amount in a mutual fund every month or on a fixed date. Its advantage is that whether the market is above or below the rupee cost average, your investment balance does not have much impact.
What is the benefit of SWP?
Best for beginners who want to save in a disciplined manner. Perfect for future goals like child’s education or retirement. A big fund is created from a small amount, the magic of compounding works, and the investment does not stop even in the market turmoil. Suppose you do SIP for 10 years, then small amounts add up to lakhs.
After this, if we talk about SWP, it is a systematic withdrawal plan. This is considered the opposite of SIP. Here you withdraw a fixed amount from the fund every month. If you are retired or want regular money, then it works like a pension. The money remains invested in the fund, keeps growing, and keeps coming as per your need. Tax is also less because withdrawals are done in a smart manner. It is a good option for post-retirement or emergency income.
When to invest in STP?
Apart from this, there is the option of STP (Systematic Transfer Plan), this is considered a middle path. If you have lump sum money, like bonus or any other big amount, first park it in a safe debt fund, then shift a little bit every month to an equity fund. If the market falls, there is profit, if the market rises, the risk remains less. There is no fear of losing all the money at once. This is a smart strategy for those looking to reduce risk.
If you compare all three, you can invest in them considering your needs. For example, if you want to start with small investment then SIP, if you want to retire then SWP, and if you want to invest big money then STP. All three can provide benefits in the long term. SIP is for building your big fund, SWP is for regular income and STP is for secure transfer of money.
(Disclaimer: This news has been published for informational purposes only. If you want to invest money in any of these shares, then first consult a certified investment advisor. StuffUnknownwill not be responsible for any profit or loss of yours.)
