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COMPARATIVE ANALYSIS AMONG  SIP, SWP, STP

Anyone who has thought about monthly investments that could lead to a lumsum, is already familiar with the concept of a systematic investment procedures. However, there are still other systematic methods, that serve these purposes too; but many get confused about which one to stick to. In the context of Mutual Funds, the most frequently used ones are – SIP (Systematic Investment Plan), SWP (Systematic Withdrawal Plan) and STP (Systematic Transfer Plan). All three are the methods of systematically investing and withdrawing investments. Each of them serves a different purpose and caters to different requirements of investors.

SIP is more of an investment, whereas STP is a transfer and SWP is withdrawal. An SIP can be regular or fixed investments over a pre-set period of interval; an STP is a regular and fixed amount that is transferred from one Mutual Fund to another scheme whereas SWP allows investors to withdraw pre-determined sums at regular intervals of time such as monthly, quarterly or yearly from any Mutual Fund scheme, where the money is invested. On thinking about the comparative analysis with respect to the benefits for customers, the basic explanation will be – SIP helps customers to lower their purchase-cost by spreading out the investments over a long time, STP is required for a lumsum amount in investment from where a customer can transfer a fixed amount repeatedly into some other scheme, whereas SWP helps the customers to withdraw certain amount of money from one of the funds at regular intervals. Thus, SIP entails an investment scheme where one can invest a certain amount of money at regular intervals over some time – it helps the customers to build up a significant amount of financial assets in the long run while reducing the impact of investing a enormous sum at once, which can be determined as one of the most stable mechanisms to invest. With STP, one can choose the time or interval at which this procedure happens – in this way customers can protect themselves from market’s instability by spreading out the funds, mainly this method is used to invest in debt securities. SWP lets the customers to withdraw their money from lumsum, that is invested in a scheme regularly, again, the interval routine is set as this process works best for retirees and the people planning for future scenerios.

With regular retail investors, the market is booming. However, the volatility of the market can be unnerving to some investors. This is where investment and withdrawal mechanisms like SIP, SWP and STP come into the picture. Depending on your needs, capital and timelines, you can choose one or a combination of these to ensure regular returns. Thus, it can be concluded that SIP, SWP and STP are systematic and strategic methods by which you can easily invest and withdraw from mutual funds and leaves the customers with much more arenas. The gaps can be easily bridged with the difference among STP and SWP, SIP and SWP and many more – thus it can be understood about what is the perfect match to reach customer’s financial goals.