All You Need To Know About SIP VS STPs

According to wealth managers, retail investors should use systematic transfer plans (STPs) or systematic investment plans (SIPs) to stagger their mutual fund investments. They also suggest that first-time market participants make lump-sum investments in hybrid funds like equity savings funds or asset-allocation funds.

Other than SIP, several strategies can be used to invest and systematically withdraw money. As a result, the Systematic Transfer Strategy STP and Systematic Withdrawal Plan SWP can be used to create a systematic investment plan.

What is SIP?

The systematic investment plan (SIP) method is a straightforward solution to avoid this problem while still earning respectable returns. Investors can also profit from a systematic transfer plan provided by mutual fund houses (STP). This permits investors to move their money from one plan to another while staying with the same fund house.

What is STP?

However, unlike SIP, many investors may not be familiar with the Systematic Transfer Plan. STP transfers money from one mutual fund plan to another, whereas SIP transfers funds from savings account to a mutual fund plan. STPs are a smart approach for reducing risks and balancing rewards by staggering your investments over a set time.

For example, even when markets are volatile, you can generate risk-free returns if you invest systematically in equities. An AMC would allow you to invest large money in one fund while regularly transferring a certain amount to another scheme. The first is the source scheme or transferor scheme, while the second is the target scheme or destination scheme.

Differences between SIP and STP

  • With a SIP, you add new money to a scheme over time, whereas with an STP, you start transferring from an existing fund.
  • One of the main distinctions is that in the case of STP, money is typically transferred from an equity fund to a liquid fund. In the case of SIP, you can allocate new funds to either a debt-dedicated or an equity-dedicated program.
  • The transaction fees are another distinction between SIP and STP. In the case of a SIP, there is usually a transaction fee that applies once a particular amount has been reached. There is a transfer charge that applies in the case of the Systematic Transfer Plan as well.

Which one is better?

There are huge differences between the two, and their goals are likewise very different. When you believe the markets have plummeted and want to make a systematic transfer from debt to equity over some time, you might opt for an STP.

However, in a rising market, allocating funds to debt-to-equity Systematic Transfer Plans would be counterproductive. You must consider your options carefully. The goal of a SIP is not to time the market but rather to invest more systematically, regardless of whether the market is rising or falling.

The goal is also very different in the case of a Systematic Transfer Plan. It entails regularly moving money from one scheme to another, usually once a month. Before investing through either of the methods, we recommend that you assess your individual priorities. Before you invest, it is advisable to seek professional advice.


As a result, SIP enables investors to take a systematic approach to long-term wealth accumulation. They can use STPs to manage these allocations intelligently. When taken together, these can assist investors in developing a complete financial strategy that will help them achieve their long-term objectives.

As a result, when choosing investment possibilities, investors must use prudence. They should also have knowledge of the scheme’s structure before investing because mutual fund investments are subject to market risk. They should also consider whether such an investment strategy is right for them. Keeping these considerations in mind can help investors accomplish their financial objectives on time.

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