Over the past few years, investing in mutual funds through the Systematic Investment Plan (SIP) has gained a lot of popularity. Nonetheless, there are other approaches besides SIP that are useful for methodically investing and withdrawing money. As a result, investors can adhere to a systematic plan by using the Systematic Transfer Plan (STP).
SIP (Systematic Investment Plan)
Methodical Investment Strategy SIP is a methodical approach to mutual fund investing. Investors can use SIP to make regular, fixed deposits into any mutual fund scheme on a weekly, monthly, quarterly, etc. basis. This payment aids in the gradual construction of a corpus.
On a predetermined date, the investor's bank account is automatically debited with the amount. The amount of debt or equity that the fund manager allocates will depend on the mutual fund scheme.
SIP investments in mutual funds assist savers in keeping a disciplined approach to their savings. Additionally, market timing and volatility are not concerns for SIP investors.
It spreads out investments over time and averages the purchase price at various market levels for investors. They therefore benefit from compounding and rupee cost averaging as a result. Long-term investing and refraining from cash withdrawals can also be advantageous to investors.
STP (Systematic Transfer Plan)
An investor can move money from one mutual fund scheme to another through the STP Systematic Transfer Plan. Money may be moved between schemes within the same mutual fund company, but not between fund houses. STP facilitates regular, systematic transfers for investors.
Investors who use the Systematic Transfer Plan (STP) allocate a fixed amount to an equity fund on a regular basis after making a lump-sum investment in a fund, typically a debt fund.
Investors with excess funds in their account that are not being used can put them in ultra-short-term funds or liquid funds. Through this process, investors can earn a little bit more on their lump-sum investment while moving funds to an equity fund. Investors must also choose how long they wish to wait to move money from one fund to another. Additionally, they must calculate the transfer amount.
