What is the difference between SIP, SWP, and STP? Learn which offers the most benefits and when to use each one..

Nowadays, everyone is looking for smart ways to grow their money. When it comes to investing in mutual funds, we often hear terms like SIP, SWP, and STP, but what do they mean? Are all three the same, or do they perform different functions? And the biggest question: which one will yield the most benefits? If you want to make better use of your money, it's crucial to understand the differences between SIP, SWP, and STP. Let's explain them in simple terms!

What is a SIP? (Systematic Investment Plan)
SIP is a method where you invest small amounts in mutual funds every month or at a fixed time. It's budget-friendly and can yield significant returns over the long term through rupee cost averaging. SIP is especially suitable for those who want to save money in a disciplined manner and don't want to take the risk of market timing.

When to do SIP?
When you want to invest small amounts to create a large corpus.

For larger future goals (like retirement, children's education).

Benefits
Small amounts can be used to create a large corpus.

Benefits of compounding.

Investments continue despite market fluctuations.

What is an SWP? (Systematic Withdrawal Plan)
SWP is a method that allows you to withdraw a fixed amount from your mutual fund investments every month. This is ideal for retirees or those seeking a regular income, as it allows your funds to grow and provides you with access to funds as needed.

When to do an SWP?
When you need a monthly income after retirement.
To generate tax-efficient income.

Benefits
Regular cash flow (like a pension).
Tax-friendly.
The money remains in the fund and continues to grow.

What is an STP? (Systematic Transfer Plan)
STP is used when you want to transfer your money from one fund to another at regular intervals. It's typically used to gradually shift a lump sum investment into equity funds to reduce the risk of market volatility.

When to use STP?
When you have a lump sum and want to transfer it to a SIP.
To reduce market risk.
Advantages:
The entire amount doesn't go into the market at once.
It controls market volatility.

Which one will yield the most benefits?
SIP is for those who want to start with a small investment and grow their wealth over the long term.
SWP is for those who need a regular income for retirement or other circumstances.
STP is for smart investors who want to gradually invest a lump sum in equities to reduce risk.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.