SWP vs. STP in Mutual Funds
| Feature | SWP (Systematic Withdrawal Plan) | STP (Systematic Transfer Plan) |
|---|---|---|
| Definition | Withdraws a fixed amount or units from a mutual fund scheme and credits to bank account at set intervals | Transfers a fixed amount or units from one mutual fund scheme to another at set intervals |
| Purpose | To create a regular income stream from mutual fund investments | To shift investments from one scheme to another to manage asset allocation |
| Ideal For | Retirees or those needing steady income from investments | Investors wanting to systematically move investments (e.g., from debt to equity) |
| Source of Funds | Existing mutual fund investments – periodic withdrawal | Transfer from one existing scheme to another existing scheme – usually Equity to Debt or Debt to Equity |
| Destination of Funds | Bank account of the investor for liquidity and income needs | Another mutual fund (usually equity for growth or debt for safety) |
| Risk Factors | Reduces market risk but may deplete corpus over time | Market risk depends on the target fund; helps manage entry/exit timing |
| Liquidity | Provides direct liquidity; funds credited to bank account | Funds remain invested but in a different scheme/asset class |
| Flexibility | Allows periodic withdrawals (monthly, quarterly, etc.) | Allows periodic transfers (monthly, quarterly, etc.) |
| Impact on Corpus | Gradual withdrawal reduces invested corpus, affecting future returns | Helps optimize allocation and reduce risk over time |
