SIP, STP and SWP are the three essential S’s of mutual funds, knowing which will help you make the most out of your investments.

Why put all your eggs in one basket? Mutual funds offer the most flexibility when it comes to investing for the long term. Since your money is invested in a broad range of asset categories, your exposure to risk is minimised. All said and done, being aware of these 3S will help you in your mutual fund journey and play the game of investing like a pro!

Systematic investment plan (SIP)
SIP is a mode of mutual fund investment using which you can regularly invest a fixed amount at predefined intervals. A fixed amount is deducted from your savings account and invested in your chosen fund. If you’re a salaried professional, this one may be a perfect option for you.

You can start a SIP from as little as Rs. 500 per month. SIPs not only inculcate a disciplined savings habit but also gives you the satisfaction of knowing that your money is working for you, just as you work hard for it! Also, SIPs spread the risk of investment over time and help you accumulate the desired corpus for various financial goals.

Systematic transfer plan (STP)
Another essential ‘S’, in the mutual fund realm, STP allows you to invest a lump sum into one fund and transfer a fixed amount at regular intervals into another fund. For instance, if you don’t want to invest in equities, you can invest a lump sum in a debt fund and transfer a certain amount at predefined intervals into an equity fund of the same fund house.

Like SIP, STP also brings discipline into your investment.  Through seamless transfers between a variety of funds, you can earn high returns at a low risk. For example, by transferring some units from debt funds into equities, you can benefit from the high return potential of the latter, keeping volatility at bay.

Systematic withdrawal plan (SWP)
SWP provides for regular withdrawal of a certain amount of money from the mutual fund scheme. The time interval of withdrawal is predetermined. This is the exact opposite of SIP. Note that while in SIP, a fixed amount of money is transferred from your bank account into a mutual fund scheme, in SWP your investment from the mutual fund scheme gets transferred into your savings account. You can withdraw either the gains on your investment or a fixed amount, on a monthly or a quarterly basis.

SWP works best you are nearing your financial goal. For instance, when you are nearing retirement and have invested in an equity fund, it makes sense to withdraw your investments at regular intervals to prevent a dip in corpus due to market fluctuations.

Whether you need to accumulate wealth for life goals or need to test the waters before investing, these 3S’s give you unmatched flexibility and growth potential. Find the best fit for your needs today!

Choose a mutual fund based on your life goal, risk appetite and duration for which you wish to remain invested. 

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* Terms & conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.