The systematic and strategic techniques for investing in and withdrawing from mutual funds are SIP, STP, and SWP. Depending on their needs, people can use any of the available solutions. In a nutshell, STP is for systematically moving funds from one Mutual Fund scheme to another, whereas SIP stands for systematically investing in Mutual Funds. Last but not least, SWP stands for systematic withdrawal of cash or redemption of Mutual Fund units. The third term covers withdrawal, while the first two terms deal with investment.

What is SIP?

SIP is a systematic approach to investing in mutual funds. You can invest every month, quarter, or year depending on your selected plan. Investors are encouraged to save money so they can eventually redeem better returns.

A few benefits of SIP include that investors can invest money into SIP even though they don’t have the time to monitor the market. Compounding features, such as reinvesting SIP interest, are also available through SIP. It can have a significant long-term favorable impact on your returns.

What is SWP?

The systematic withdrawal plan (SWP), also known as a mutual fund investment plan, enables investors to take predetermined sums from any mutual fund scheme in which they have invested on a monthly, quarterly, or annual basis.

The AMC will credit the investors’ bank accounts with the money they have withdrawn on any day of the month, quarter, or year. By routinely exchanging mutual fund scheme units, SWP Plan generates cash flow. As long as units are available in the program, SWP investors may continue to make investments.

What is STP?

A lump sum investment is made into one mutual fund scheme (often a debt fund) under the Systematic Transfer Plan (STP), after which a regular amount is transferred to another mutual fund scheme (usually an equity fund). Investors invest their lump sum in less risky funds such as money market funds, liquid funds, arbitrage funds, etc. This money is moved via STP to funds with a reasonably high level of risk, such as diversified equity funds, thematic funds, sectoral funds, international equity funds, etc.

Using the STP technique, market timing can be avoided. The source fund from which the transfer occurs and the destination fund in which it occurs must be owned by the same mutual fund house for the Systematic Transfer Plan to function.

For instance, Mr. X has a 1 lakh rupee annual incentive from his company. Mr. X can place this one-time quantity of money in a liquid fund. He could direct the AMC to deposit Rs. 8,000 monthly from the liquid fund into an equity scheme of his choice using the STP option. The gradual transfer of funds from one fund to another fund is thus a component of STP.

Key Points of SIP, STP, and SWP

  • Small periodic payments through STP are comparable to SIP because they provide rupee averaging costs. It also serves as a buffer against turbulent markets and gives compounding growth with monthly returns.
  • In contrast to SIPs and STPs, where payments and transfers must occur every month, periodic repayments under the SWP might occur quarterly, semi-annually, or annually.
  • When investors get large sums of money from funds and need to find a way to make money, SWP is typically utilised as a payment method. The returns from one fund are frequently deposited in a low-risk MF scheme, and funds are withdrawn via SWP.
  • Regular withdrawals also aid in avoiding market volatility because the total amount is redeemed over a period that balances the market rather than during high or low points. Regular withdrawals bring the return value to average.


The systematic and strategic methods of investing in and withdrawing from mutual funds known as SIP, STP, and SWP provide you with several advantages. Understanding the differences between STP, SWP, and SIP will make it easier for you to choose the strategy that best serves your financial goals.