SIP vs STP vs SWP Explained: The Best Choice For Your Mutual Fund Goals

One of the most common questions on public forums regarding investing in mutual funds is – ‘SIP, STP or SWP: Which option is best to invest in mutual funds?’ Now, while all three terminologies are systematic methods to either invest or redeem from mutual funds, the three serve different purposes for investors. Let’s look at what each of them means and how they work so you can make a better choice.

What does SIP in mutual funds mean?

Systematic Investment Plan or SIP is a popular method of investing in mutual funds where an investor decides to invest a predetermined amount of money in the selected mutual fund(s) at regular periods (often once a month). The amount gets automatically deducted from your bank account and is invested in the pre-selected mutual fund scheme. Understand SIP as similar to a recurring deposit where you deposit a small or big but fixed amount every month.  Mutual funds have collected a record high investment of Rs 29,529 crore in October. So far in the financial year 2025-26, till October 2025, mutual funds have garnered over Rs 1.96 lakh crore via SIPs. Over the last financial year, SIPs collected a massive over Rs 2.89 lakh crore worth of investments.

A major advantage of SIPs is that you can invest even a small sum in mutual funds through them. Some mutual funds now allow you to invest as low as Rs 250 per month in mutual funds through SIP. It teaches investors to be disciplined and regular about their investments. The disciplined approach of investing through SIP in mutual funds helps to build a significant corpus in the long term. The best part is that investors investing through SIP need not time the market. The investments continue to happen at regular intervals automatically from your bank to the mutual fund scheme.

What Does STP in Mutual Fund Mean?

An STP, or systematic transfer plan, transfers a set amount of money from one mutual fund to another on a regular basis.

An STP, for example, might move Rs 5,000 per month from Axis Liquid Fund to Axis Bluechip Fund on a weekly or monthly basis as defined by the investor. An STP is often used to move money from a liquid or debt fund to an equity fund. This is done when an investor has a lump sum to invest but does not want to invest it all in one go at one point in time in the stock market. Instead, the investor wants to scatter and invest across a pre-set time period. For instance, if an investor has received Rs 10 lakh from an insurance policy, which he wants to invest in mutual funds, he can do so via STP. He can invest Rs 10 lakh in the selected fund’s liquid or ultra short-term fund, and from there, he can set up a weekly STP for Rs 50,000 to an equity fund of his choice. This way, his entire Rs 10 lakh will be invested into equity fund(s) scattered over a 5-month period. This averages out an investor’s purchase price in the equity fund, lowering his or her risk.

What does SWP in a Mutual Fund mean?

While SIP and STP are the modes to invest in mutual funds, SWP, or Systematic Withdrawal Plan, is the method to withdraw from mutual funds in a systematic way.

SWP allows investors to withdraw predetermined sums at regular intervals, such as monthly, quarterly, or yearly, from any mutual fund scheme.  SWP is a useful technique for investors who wish to withdraw a pre-decided amount from mutual funds on a regular basis. For instance, a retired person who has built a massive corpus in mutual funds now wants to utilise that corpus to take care of his day-to-day expenses by withdrawing a fixed sum on a monthly basis.

Just like SIP and STP, the investor would have to decide a day of the month /year/ week to withdraw. Once instructions are given to the mutual fund house, the fixed amount would be withdrawn from the mutual fund scheme and credited to the investor’s bank account every month on the same day.

SIP vs STP vs SWP: Which one is better?

SIP, STP, and SWP are all systematic and strategic approaches to investing and withdrawing from mutual funds. All three serve a different purpose. An investor can select any of these as per their needs. An investor can even opt for more than one technique. Suppose an investor wants to invest every month in mutual funds for his long-term goal of wealth creation from his salary, so he selects 2-3 mutual funds and opts for a monthly SIP.

Recently, the investor has received Rs 5 lakh as maturity proceeds from an insurance policy, so he uses STP to invest that sum into equities over a 2-3 month period.

Now, once the investor retires, if he wants to withdraw small amounts from the corpus built in mutual funds on a monthly or weekly basis, he could  opt for SWP to withdraw from mutual funds regularly.

In short, SIP, STP, and SWP are tools for different stages of your financial journey—use the right one at the right time, and your mutual fund strategy will work far more smoothly for you.