Home>Questions>What is the different between SIP, SWP and STP?

What is the different between SIP, SWP and STP?

I am new to investing and I want to understand what is difference between these terms when it comes to investing?

Mridul Agrawal

SIP is a systematic way of investing your money in mutual funds. You can invest every month or quarter or year, it depends on the plan you have chosen. It encourages investors to save money and in the end, they can redeem better returns. 

A few features of SIP are- investors don’t have time to keep an eye on market and hence can pour in money into SIP. In SIP, one can also get the benefits of compounding i.e., you can reinvest the interest earned from the SIP. In the long run, it can make a huge positive impact on your returns.

Systematic Withdrawal Plans (SWP), allows you to withdraw any amount of money from a mutual fund whenever you want. Funds are generally withdrawn either to re balance the existing portfolio by investing in other funds or for meeting personal expenses. SWP is somewhat the reverse of SIP. If you invest lump sum in a mutual fund, you can set an amount you’ll withdraw regularly and the frequency at which you’ll withdraw.

STP stands for Systematic Transfer Plan. STP is an automated way of moving (transferring) money from one mutual fund to another. This plan is chosen when one wants to invest a lump sum amount but wants to avoid the marketing-timing risk. The most common and sensical way of doing STP is to transfer money from a debt fund to an equity fund.

Pijush Kanti Biswas

These are the different methods of investing in mutual funds.

Systematic Investment Plan (SIP):

  • An SIP is an option of investing a fixed sum in a mutual fund scheme on a regular basis i.e. predefined regular intervals. It is similar to regular saving schemes like a recurring deposit.
  • It is a disciplined investment plan and cost averaging helps reduce impact of market volatility.
  • With SIP, one can build up significant wealth in long run with small sums of money.

Systematic Withdrawal Plan (SWP):

  • SWP is a smart way to plan for your future needs by withdrawing amounts systematically from your existing portfolio either to reinvest in another portfolio or to meet your expenses.
  • It is suitable for retirees who are looking for a fixed flow of income.
  • SWP helps investors who require liquidity as it allows them to access their money precisely when they need it.

Systematic Transfer Plan (STP):

  • STP is a plan that allows the investor to give a mandate to the fund to periodically and systematically transfer a certain amount/ number of units from one scheme and invest in another scheme.
  • This helps ensure that your money is unaffected by any market volatility in short term.

Happy Investing!


Systematic Investment Plan (SIP), Systematic Withdrawal Plan (SWP), and Systematic Transfer Plan (STP) are all methods of systematic investment and withdrawal. They inculcate financial discipline in the investor. The differences between the 3 modes can be illustrated as under:

SIP represents an investment option wherein the investor invests a fixed amount at pre-defined time intervals over a period of time. It enables the investor to build a corpus over time and average out the cost of purchasing. This helps in maximizing returns by avoiding purchase ar peak prices. The frequency of such investment can be montly, weekly, or even daily. SIPs have limited use if you want to invest in debt securities, as they are stable and thus cause the averaging out benefit of SIPs to be redundant.

SWP allows the investor to withdraw a specified amount from the fund at regular intervals of time. Most suited to retirees looking for a fixed flow of income, SWPs provide the investor some protection from market volatility. These funds provide investors with liquidity as it allows them to wothdraw funds when they need them and as much as they need to meet their objectives.

STP is a plan that allows the fund manager to transfer funds from units of one scheme to units of another scheme, with the consent of the investor. After the investor has invested a lumpsum amount in one of the schemes, he can transfer a fixed amount regularly to another scheme. This enables the investor to safeguard himself from market volatility by transferring funds from equity to debt oriented schemes during turbulent times and back to equity during times of growth. Typically, the larger the lumpsum amount was the longer the duration of STP is. Funds can also be transferred from equity to debt oriented schemes to save up for a particular goal, like child's education, buying a home, etc.

Hope this answers your question!


SIP is systematic investment plan. It means you will invest regularly in a particular fund.

STP is systematic transfer plan, meaning your money will move regularly from one fund to another of the same AMC. Mostly people park their money in debt funds and do STP to aggressive equity funds. Useful when you have uninvested lump sum money.

SWP is systematic withdrawal plan is to generate regular income from lump sum. Just like SIP is investing regularly every month. Systematic withdrawal plan (SWP) is redeem a fixed amount regularly.

You can automate all the three (SIP, SWP and STP) on Groww.

New to Mutual Funds?
Start exploring mutual funds to begin your investment journey
Have a SIP!
Start and manage monthly investments on Groww, simple and fast
ⓒ 2016-2021 Groww. All rights reserved, Built with in India