SIP vs SWP vs STP

Choose between NAV, SIP, STP, and SWP

STP (Systematic Transfer Plan)

In simple words, STP means transferring money from one mutual fund to another. STP is a smart strategy of investment over a specific term to reduced risks and balanced returns. Here, an AMC (Asset Management Company) permits you to put a lump sum in one fund, and transfer a fixed amount to another scheme regularly.
STP is a useful tool in mutual funds to average your investment over a specific period, which depends on three factors:

  1. Market view
  2. The risk profile of the investor
  3. An investor’s current allocations to equities.

Things to remember while investing via STP:

  • STP is the method that requires discipline; it’s not you who gets to cook your money overnight; it will take time to cover your returns.
  • It would help if you kept an eye on the underlying assets and their phases.
  • STP is one of the most reliable risk-reducing investments in which you can invest.
  • Go with STP only if you have a lump sum amount to invest.
  • You need to make at least 6 STPSs as per the SEBI guidelines.

In short, STP is a useful strategy to manage risks without affecting your returns significantly.

SIP – The recommended option

A SIP (Systematic Investment Plan) is an ideal way of investing in mutual funds. It allows you to invest in regular intervals. It is also called the “planned way of investing.” It helps investors to cultivate a habit of saving and accomplish the goal of wealth creation.
Through SIP, you can invest in a quarterly, monthly, or weekly basis as per your convenience. A fixed amount is debited from the policyholder’s account and invested in mutual funds. As you start investing a pre-decided number of units get allocated as per the current market price. Besides, mutual funds plans are flexible in nature, and you also have the option to discontinue it whenever you wish. However, you make the most out of Mutual Funds investments, remember to stay invested for a long period.

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De-Jargon SIP, STP and SWP

SIP, STP, SWP

Net Asset Value

NAV stands for Net Asset Value. Generally, the “net” arrives only when you remove the cost incurred from the price.

For example: Imagine there are 100 investors and each invested Rs 1,000 in an Equity fund. Each unit price will be Rs 10. Then the sum of Rs 1 lakh is invested in various stocks of mutual funds. A year later the value of Rs 1 lakh will be turned out to Rs 1.5 lakhs, giving a profit of Rs 50k.  If the cost of 10k is removed, then the profit earned is 40k. Then, the unit price will go from Rs 10 to Rs 14. Now, your 100 units worth is Rs 1.400.

Thus,

  • Investors can access the performance of the fund through the NAV differentials.
  • NAV helps to identify potential investment opportunities.
  • One can also use NAV to view the holdings in their portfolio.

Systematic Investment Plan

Why everybody is talking about SIP? What’s this cool new thing that you should know about.

SIP is a Systematic Investment Plan. This is the same as your Recurring deposits where you make periodic investments into mutual funds. Fixed money will be deducted from your bank savings account and will be directed towards the mutual fund for which you have opted for.

The two things which are good about SIP:

  1. Some people make a target for saving in SIP and spend the rest. Thus it’s very useful in building the habit of regular investment.
  2. SIP allows you to average out your price as you invest over the years, either monthly or quarterly.
  3. Also, SIP helps in reducing the risk of the market as it spreads the money throughout the various market cycle.

How SIP is different from a one-time investment:

SIP One- time investment
Periodic investment Lump sum investment
Earns better even when markets are low Earns when markets are high
Protect investment from a market crash Investments will be affected due to the market crash

MyWay Wealth

MyWay Wealth app screen shots

Remember, Systematic Investment Plan is a vehicle, not a goal, you use a SIP to make investments and you can choose to have financial adviser if needed.

You can start investing in SIP with just Rs 100. Here, you have the best investment platform- MyWay Wealth.

STP- Systematic Transfer Plan:

Investors worry about making lump sum investments because of risk appetite. This is where STP helps you to mitigate the risk. In SIP, you will move your money from saving to a mutual fund whereas, in STP,  you will move your money from one fund to another. Instead of investing all in one go, you can put money in a liquid fund and set up a monthly/ weekly/ yearly transfers into different equity schemes.

SWP- Systematic Withdrawal Plan:

Here, you can either choose to withdraw capital gains on your investments or a fixed amount.this way you will not only have money still invested in the scheme but also it can be part of your regular income and returns.

Why SWP?

  1. With the SWP, you can time your withdrawals as per your financial needs. It ensures the availability of funds at the right time.
  2. With this plan, an investor can create a flow of income from an investment that is regular.

Hope this article helped you to understand the various ways of investing. Remember to make a thorough analysis of each before you make your choice. However, the most recommended option is SIP as it allows you to get into the habit of saving and provides the benefit of compounding.

Think Smart! Think MyWay Wealth!

SIP vs Lump sum

The story goes like this. There were two bachelors living in the city of Bengaluru. One was getting his income monthly and gave the landlord a portion as rent. Whereas the other gave a whole deposit for the accommodation for a fixed time of stay. Now what does the two have in common and what do they have in distinction? Who has the better deal? This is the same as choosing on to take a lump sum investment or a SIP (Systematic Investment Planning) in a Mutual Fund investment.

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Don’t let your money go, let it grow!

Dear Customer,

Time becomes more precious when it comes to investments for the future. Don’t delay, here are 4 good reasons why you shouldn’t delay mutual fund investments.

1. Risk Horizon

Higher the risk, higher the return, so better to start young when you have a large appetite for risk.

2. Cost of Delay

Each month delay in a monthly SIP of Rs 10,000 (for 30 years) could cost 2 Lakh per month. (CAGR ~ 18%*).

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Worried about your investments in falling markets? SIP your way out of it

I assure you, no one would say these words of wisdom to you while having discussions about markets and money these days:

  • There could be no better time than right now to stay invested in your funds.
  • It might not be a good time to withdraw your money now.
  • The next few months could be great to invest systematically using SIPs.

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