Do You Know about SIP, STP and SWP ???
Systematic
investment plan (SIP), systematic transfer plan (STP) and systematic
withdrawal plan (SWP) are methods of systematic investing and
withdrawal, each serving a different purpose.
Systematic investment plan (SIP)
An SIP allows you to invest
small amounts of money over time to build a corpus. By spreading out
investments over a period of time, they help investors average their
purchase cost. This prevents you from committing all your money at a
market peak, and hence maximises returns. SIPs also bring discipline to
investing and make investing a habit.
The frequency of SIPs can vary - you can do a monthly, weekly or
daily SIP. Also, there are various types of SIPs. For instance, a value
SIP changes your SIP amount based on the expensiveness of the market.
Though having this option sounds good, tinkering with the basic idea of
an SIP only makes it unnecessarily complex. You are better off sticking
to an ordinary SIP, preferably on a monthly basis.
SIPs have limited use in debt schemes as they are not as volatile or risky as equity schemes.
Systematic transfer plan (STP)
Generally, one opts for an
STP when there is a lump sum to invest. Like a SIP, an STP helps spread
out investments over a period of time to average the purchase cost and
rule out the risk of getting into the market at its peak. However, with
an STP, you invest a lump sum in one scheme (mostly a debt scheme) and
transfer a fixed amount from this scheme regularly to another scheme
(mostly an equity scheme).
The basic idea behind an STP is to
earn a little extra on the lump sum while it is being deployed in
equity, since debt funds provide better returns than a normal savings
bank account.
Depending on the lump-sum amount, the investor can
decide the period over which he wants to deploy the money in the market.
Typically, the larger the amount, the longer the time period.
An
STP can be done from an equity fund to a debt fund as well. If you are
saving for an important goal like your child's education, buying a home
or retirement and you are nearing your goal, don't wait till the target
date. Begin moving your money from equity to debt well before the time
when you will need the money.
Systematic withdrawal plan (SWP)
An SWP allows you to withdraw a specific sum of money from a fund at
regular intervals. Such a system is particularly suited to retirees, who
are typically looking for a fixed flow of income. SWPs provide the
investor with a certain level of protection from market instability and
help avoid timing the market.
Sources:
Various publications
Disclaimer: The
information provided herein is based on publicly available information and
other sources believed to be reliable, but involve uncertainties that could
cause actual events to differ materially from those expressed or implied in
such statements. The document is given for general and information purpose and
is neither an investment advice nor an offer to sell nor a solicitation. While
due care has been exercised while preparing this document, we do not warrant
the completeness or accuracy of the information. We will not accept any
liability arising from the use of this material. The recipient of this material
should rely on their investigations and take their own professional advice.
Follow, Like, subscribe and
share
"Your Trust, Our
Financial Expertise."
Infyture, Investment For Your Future
infyture.blogspot.com
Financial Planning ||
Equity Tip || Demat Account || Mutual Fund Investment || Life Insurance ||
General & Health Insurance || PMS & mini PMS || Retirement Planning
No comments:
Post a Comment
Please do not Enter any Spam Link in Comment Box