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SIP and STP are mutual fund tools. SIP involves regular income investments, ideal for new investors. STP transfers lump sums from debt to equity funds, reducing market timing risks.
SIP vs STP: Know key differences in investment strategy. (AI Generated)
SIP and STP are two strategic investment tools in mutual funds (MFs). Both strategies have their advantages while investing in mutual funds. MFs pool investors’ wealth to invest in debt or equity segments and try to generate profits in exchange for a commission.
What Is SIP?
Systematic Investment Plan (SIP) is a popular investment strategy where you invest a fixed amount regularly (monthly, weekly, or quarterly) in a chosen mutual fund scheme. This method is particularly beneficial for salaried individuals and those looking for a disciplined approach to gradually build wealth in equity funds.
What Is STP?
Systematic Transfer Plan (STP) is a lesser-known but equally valuable investment strategy. STP allows you to transfer a predetermined amount regularly from one mutual fund scheme to another. This strategy is especially useful for investors with a lump sum amount who want to gradually shift their investments from debt funds to equity funds, mitigating market timing risks.
Key Difference And When To Use
Which The main difference lies in the source of investment. SIP uses fresh contributions from your income, while STP utilizes an existing investment, typically from a debt fund. If you are starting your investment journey, SIP in a mutual fund is ideal. However, if you have a lump sum available, starting with STP, transferring funds from a debt fund to an equity fund over time, can be a strategic approach.
| Feature | SIP | STP |
| Purpose | Invest small amounts regularly | Transfer money from one fund to another |
| Initial Investment | No lump sum required | Requires a lump sum investment |
| Best For | Regular investors | Those with a lump sum amount |
| Risk Management | Reduces risk through gradual investment | Reduces risk by staggered transfers |
| Common Usage | Investing in equity funds | Moving from debt to equity funds |
Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
