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By:

Kaustubh Kale

10 September 2024 at 6:07:15 pm

SIP vs STP vs SWP

In mutual funds, investors often hear three important terms - SIP, STP and SWP. These may sound technical, but they are actually simple and powerful facilities provided by mutual funds. They help investors invest, transfer and withdraw money in a disciplined and automated manner. Systematic Investment Plan This is the most commonly known concept. In an SIP, a fixed amount is automatically debited from your bank account on a fixed date and invested into selected mutual fund schemes. For...

SIP vs STP vs SWP

In mutual funds, investors often hear three important terms - SIP, STP and SWP. These may sound technical, but they are actually simple and powerful facilities provided by mutual funds. They help investors invest, transfer and withdraw money in a disciplined and automated manner. Systematic Investment Plan This is the most commonly known concept. In an SIP, a fixed amount is automatically debited from your bank account on a fixed date and invested into selected mutual fund schemes. For example, if a 30-year-old investor starts investing INR 10,000 per month for retirement and continues till the age of 55, the investment period is 25 years. Assuming a long-term return of around 12% per annum, this monthly investment can grow to approximately INR 1.70 crores. Please note, INR 10,000 is only a small amount used for illustration. Your SIP amount should be sufficient for your goals. Ideally, investors should try to invest at least 30% of their in-hand monthly income. The biggest benefit of SIP is discipline. You do not have to remember to invest every month. The process is automated. SIP also helps you invest through market ups and downs, reducing the stress of timing the market. That is why SIP is also popularly called Sapna-In-Progress. Systematic Transfer Plan In SIP, money moves from your bank account to a mutual fund. In STP, money moves from one mutual fund scheme to another. This is especially useful when you have a lumpsum amount but do not want to invest it into equity funds in one shot. For example, an investor has INR 20 lakhs to invest for the long term. He may worry about market volatility if the entire amount is invested at one go. In such a case, the money can first be parked in a debt mutual fund, and then gradually transferred to an equity mutual fund through STP. For example, INR 40,000 can be transferred every week over around 50 weeks. STP is flexible in terms of duration, frequency, amount and choice of schemes. STP gives comfort, automation and gradual participation in equity markets. Systematic Withdrawal Plan This is the exact reverse of SIP. In SIP, money goes from your bank account to a mutual fund. In SWP, money comes from your mutual fund to your bank account at regular intervals. SWP can be very useful after retirement. Suppose an investor has built a corpus of around INR 10 crores by the age of 55. He can set up an SWP to receive, say, INR 5 lakhs per month for his regular expenses. If the corpus is invested wisely with proper asset allocation, the investor can receive regular income and still allow the balance corpus to grow over time. To understand the power of this, consider an actual scheme’s past performance. A corpus of INR 10 crores would have grown to around INR 30 crores over 15 years, even after the investor withdrew INR 5 lakhs every month. In simple words, SIP helps you invest regularly, STP helps you transfer wisely, and SWP helps you withdraw systematically. Used properly, these three tools can make wealth creation and retirement planning more disciplined, automated and peaceful. (The author is Chartered Accountant and CFA (USA). Financial advisor. Views personal. He could be reached on 9833133605)

Heighten credit risks for both nations: S&P

  • PTI
  • May 8, 2025
  • 2 min read

New Delhi: S&P Global Ratings on Thursday said the hostilities between India and Pakistan heighten risks to the credit metrics of both countries, and any escalation in clashes would put downward pressure on sovereign credit support.


S&P, which rates India and Pakistan at 'BBB-' with a positive outlook and a 'CCC+' (outlook stable), said that in the current scenario, it does not see any immediate impact on sovereign credit rating and expects the tensions to remain high over the next two to three weeks, with significant further military actions on both sides possible.


"The outbreak of hostilities between India and Pakistan has increased regional credit risks, especially for the two sovereigns involved. Our base case is for the intense military actions to be temporary, which will give way to a longer period of contained and sporadic confrontations," S&P Global Ratings said in a statement.


S&P said it expects India to maintain strong economic growth that allows gradual fiscal improvements to continue, and also the Pakistan government to remain focused on supporting the recovery of its economy and fiscal stability. Both countries have no incentive to allow current tensions to become prolonged, it said.


Last week S&P cut FY26 India's growth forecast to 6.3 per cent, from 6.5 per cent pegged earlier, citing uncertainty over US trade policy.


A protracted military conflict will derail the improvements to Pakistan's external and fiscal metrics that would support a return to macro stability.


For India, a prolonged military conflict will also lead to difficulty attracting foreign investors seeking to reconfigure their international production activities amid the uncertain global economic environment," S&P said.


S&P said the current situation raises the "specter of miscalculations and accidental clashes" that could escalate well beyond the intentions of both sides. Such a scenario would materially worsen credit risks. "The downward pressures on sovereign credit support will exacerbate if there is no material de-escalation in the next few weeks," S&P said.


"We anticipate tensions to remain high over the next two to three weeks, with significant further military actions on both sides possible. However, the situation is likely to de-escalate following that, leaving little persistent negative impact on sovereign credit metrics," it added.


Earlier this week, Moody's Ratings had projected India's growth at 6.3 per cent for the current fiscal and said that geopolitical stresses, like the tension between India and Pakistan, have a potential downside risk to its baseline growth forecasts.

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