Difference between SIP, STP, SWP, and Flex STP

Difference between SIP, STP, SWP, and Flex STP


SIP vs STP vs SWP vs Flex STP, Know the difference.

Mutual funds offer various ways of investing for an investor. An investor can decide the mode of investment based upon his requirements. These requirements may be the format of the time horizon of investment, the amount of money to be invested, and periodicity of investment – one time or on regular intervals.

Here we present the difference between SIP, STP, SWP, and Flex STP, each of which is a way to invest or withdraw from a Mutual Fund investment:

1. SIP (Systematic Investment Plan)

SIP stands for Systematic Investment Plan. In SIP, an investor makes a fixed amount of investment at fixed pre-defined intervals in the selected mutual fund scheme. SIP intervals may be daily/weekly/monthly/quarterly/semi-annually or annual and the fixed investment amount can be as low as Rs.100

Benefits of SIP investing:

  • A SIP induces discipline, because every month, a fixed amount is deducted from your account. It is invested in your selected fund. When your bank account has the requisite money available on the withdrawal date, the investment happens by itself.
  • SIPs bring peace of mind as one does not have to worry about timing the market or market volatility.
  • SIP helps one calculate one’s financial goals. For example, at 6% inflation, a car that costs Rs 7.5 lacs today will cost 10 lacs 5 years from now. When one invests Rs. 12,500  per month for 5 years and the investment gives a return of 12% p.a than one can accumulate a corpus of 10.13 lakhs and thus be able to fulfil the goal of owning their favorite car.
  • SIPs give the benefit of Rupee Cost averaging so you buy more units when prices are low and less units when prices are high


STP (Systematic Transfer Plan)

STP is a systematic transfer plan which allows the investors to shift investment from one scheme to the other of the same fund house. One can transfer their investment periodically as well, just as in the case of SIP. Generally, STP method is used to invest a lumpsum amount in liquid scheme and transfer a fixed amount to an equity scheme every month.

Benefits of STP investing:

  • STPs are advantageous because they allow one to derive maximum value for one’s money in a dynamic equity market scenario.
  • STPs make the best of the power of compounding, through tactical asset allocation and rebalancing. This further helps with financial planning, wherein rupee cost averaging reduces the risk in your portfolio.


SWP (Systematic Withdrawal Plan)

SWP is a Systematic Withdrawal Plan which allows you to withdraw a fixed amount from your mutual fund scheme at your chosen time interval. One can withdraw their money every month, quarterly, semi-annually, or annually as per one’s requirements.

Benefits of SWP:

  • One can systematically redeem one’s money based upon liquidity requirements.
  • One can hence have a fixed income in one’s bank account every month.


Flex STP (Flexible Systematic Transfer Plan)

Flex STP is a Flexible Systematic Transfer Plan where the size of the installment is varied based on market levels or valuation of existing investment. Flex STP is available on a monthly and quarterly basis.

Benefits of Flex STP investing:

  • Flex STP puts an investor in the best position to derive the maximum value from bearish phases in the market. Flex STP invests more during falling markets thus it works as a Value Averaging Plan.
  • Overall, Flex STPs simplify decision making as taking advantage of market movements becomes hassle-free and automatic. Total returns are enhanced as investor invests more money when market is low.
  • The monthly installments are calculated using the following formula

(fixed amount per instalment x no. of instalments including current) – Market Value



SIP, STP, SWP, and Flex STP all are systematic and strategic methods by which you can easily invest and withdraw from Mutual Funds.

Contact us for knowing what will work best for your investments.

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