SIP, SWP and STP: The Three Systematic Ways to Grow Your Wealth with Mutual Funds

• SIP, which stands for Systematic Investment Plan, is a way of investing money in a mutual fund regularly, like every month or every quarter. With SIP, you can slowly build up your wealth over time. It’s like putting in a fixed amount regularly, which helps balance out the overall cost of buying and takes advantage of the power of compounding.

• SWP, or Systematic Withdrawal Plan, is when you take out a fixed amount of money from a mutual fund at regular times, like every month or every year. SWP is useful because it provides you with a steady income from your investments and also helps in lowering the tax impact on the money you’ve gained.

• STP, or Systematic Transfer Plan, is when you move a fixed amount of money from one mutual fund to another regularly, like every week or every month. STP is helpful because it allows you to shift your money from one type of investment to another based on how much risk you’re comfortable with and what the market conditions are like.

Here’s a simple example of STP: Let’s say you have put Rs 1,20,000 in a debt fund, and you want to gradually move it to an equity fund over 12 months. With an STP, you can set it up to transfer Rs 10,000 every month from the debt fund to the equity fund. This helps you lessen the risk of sudden changes in the market and lets you earn interest on the debt fund until all the money is moved.