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What is the difference between SIP,STP& SWP
September 15th, 2023 Mutual FundThese are the different methods of investing in mutual funds.
Systematic Investment Plan (SIP):
- An SIP is an option of investing a fixed sum in a mutual fund scheme on a regular basis i.e. predefined regular intervals. It is similar to regular saving schemes like a recurring deposit.
- It is a disciplined investment plan and cost averaging helps reduce impact of market volatility.
- With SIP, one can build up significant wealth in long run with small sums of money.
Systematic Withdrawal Plan (SWP):
- SWP is a smart way to plan for your future needs by withdrawing amounts systematically from your existing portfolio either to reinvest in another portfolio or to meet your expenses.
- It is suitable for retirees who are looking for a fixed flow of income.
- SWP helps investors who require liquidity as it allows them to access their money precisely when they need it.
Systematic Transfer Plan (STP):
- STP is a plan that allows the investor to give a mandate to the fund to periodically and systematically transfer a certain amount/ number of units from one scheme and invest in another scheme.
- This helps ensure that your money is unaffected by any market volatility in short term.