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Swps And Stps

You must have heard of Systematic Investment Plans (SIPs), where you invest a fixed sum of money in a mutual fund scheme every month or any other periodic time interval.
But have you heard of Systematic Withdrawal Plans (SWPs) and Systematic Transfer Plans (STPs)? If you have read of them somewhere and are wondering what they are all about, you’ve some to the right place to satisfy your curiosity.
Systematic Withdrawal Plan
SWP is the reverse of a SIP, with a slight difference. In a SWP, you make a lumpsum investment initially and then you withdraw specific amounts at regular intervals. At the same time, your investment is earning returns with the mutual fund scheme in which you have invested your money.
When you opt for a SWP, you have to specify how much you plan to withdraw and at what time intervals, that is, monthly, quarterly etc. The fund house will usually require you to maintain a minimum balance in your investment account as long as you continue with the scheme.
There is some difference between a SWP and a monthly income plan, where also you get ...
... a sum every month. In the case of the MIP, what you get every month is the interest from your investment. With SWP, what you get is the principal amount that you have invested.
Systematic Transfer Plan
This is an interesting plan in which you can transfer your investments from one scheme to another, managed by the same fund house.
Just as an example – suppose you have invested in an equity scheme managed by ABC Fund. Any profit you make can be transferred to a debt fund managed by ABC.
Again, while opting for the plan, you have to specify at what periodicity you want the transfer to take place and may be even the amounts (though there can be some flexibility in this matter).
Transfer means redeeming units from the first scheme and then making purchases in the second scheme, both of which are fresh transactions. Many fund houses waive the transaction charges associated with these transfers to encourage investors to invest in such plans.
STPs are a good way to manage your investments and achieve your financial goals.
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