SIP vs SWP – What's the Difference?

Mutual fund investments are one of the most popular forms of investment avenues available to the audience in India. With funds, one can invest through various systematic strategies like SIP, STP, SWP etc., apart from lump-sum investment. The article below focuses on the difference between SIP and SWP in various funds.

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SIP Insurance Plan Benefits
Start SIP with as low as ₹1000
Start SIP with as low as ₹1000
No hidden charges
No hidden charges
Save upto ₹46,800 in Tax
Save upto ₹46,800 in Taxunder section 80C^
Zero LTCG Tax
Zero LTCG Tax
Disciplined & worry-free investing
Disciplined & worry-free investing

  • Insurance Companies
  • Mutual Funds
Returns
Fund Name 3 Years 5 Years 10 Years
Virtue II PNB Metlife 18.68% 25.83%
16.48%
View Plan
Pure Equity Birla Sun Life 17.56% 21.84%
15.07%
View Plan
Large Cap Equity Fund Tata AIA 18.45% 21.82%
14.88%
View Plan
Grow Money Plus Fund Bharti AXA 14.74% 18.58%
14.12%
View Plan
Pure Stock Fund Bajaj Allianz 17.34% 20.53%
14.04%
View Plan
Diversified Equity Fund HDFC Standard 14.77% 17.79%
13.96%
View Plan
Growth Super Fund Max Life 15.5% 17.5%
12.83%
View Plan
Equity Fund SBI 14.88% 16.53%
12.1%
View Plan
Bluechip Fund ICICI Prudential 13.23% 15.89%
11.33%
View Plan
Growth Plus Fund Canara HSBC Oriental Bank 12.92% 13.89%
10.36%
View Plan

Updated as of Dec 2024

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  Returns
Fund Name 3 Years 5 Years 10 Years
Active Fund QUANT 24.92% 31.48%
21.87%
Flexi Cap Fund PARAG PARIKH 20.69% 26.41%
19.28%
Large and Mid-Cap Fund EDELWEISS 22.34% 24.29%
17.94%
Equity Opportunities Fund KOTAK 24.64% 25.01%
19.45%
Large and Midcap Fund MIRAE ASSET 19.74% 24.32%
22.50%
Flexi Cap Fund PGIM INDIA 14.75% 23.39%
-
Flexi Cap Fund DSP 18.41% 22.33%
16.91%
Emerging Equities Fund CANARA ROBECO 20.05% 21.80%
15.92%
Focused fund SUNDARAM 18.27% 18.22%
16.55%

Updated as of Dec 2024

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Systematic Investment Plan (SIP)

SIP is a disciplined investment method wherein an individual invests a fixed amount in the preferred mutual fund scheme at regular intervals. These intervals can be in the form of monthly, fortnightly, quarterly or any other available frequency type. SIPs are usually mentioned in the context of equity mutual funds and are thus considered a goal-based investment approach. It provides an excellent opportunity for individuals to invest in equity markets even with a small amount of Rs. 500 (or even Rs. 100 in some cases). It is suggested to explore best SIP plans list before taking investment decision.

SIP Calculator

I want to invest Pro Tip
Financial experts suggest that a person should invest 10-15% of their monthly income for long-term financial growth
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I want to invest for Pro Tip
Financial experts suggest that individuals should ideally invest for a period of 5 to 10 years, or even longer, to maximize the benefits of compounding and navigate market fluctuations effectively
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Expected return Pro Tip
Top 25% of investors consistently generate more than 12% return
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Total Wealth ₹22.4 L
View Plans
I want to save
I want to invest for Pro Tip
Financial experts suggest that individuals should ideally invest for a period of 5 to 10 years, or even longer, to maximize the benefits of compounding and navigate market fluctuations effectively
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Expected return Pro Tip
Top 25% of investors consistently generate more than 12% return
% Annually
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Monthly Investment ₹22.4 L
View Plans
Top Funds with High Returns (Past 7 Years)
High Growth Fund
19.3%
High Growth Fund
Accelerator Mid-Cap Fund II
15.61%
Accelerator Mid-Cap Fund II
Opportunities Fund
15.48%
Opportunities Fund

Systematic Withdrawal Plan (SWP)

A systematic Withdrawal Plan or SWP works oppositely to that of a SIP. In the SWP strategy, individuals are allowed to redeem fixed amounts from mutual fund schemes. For the SWP strategy, the investor first purchases some units of a mutual fund scheme which usually has a low risk (mostly liquid funds). They then give instructions to redeem a fixed amount from these schemes at regular intervals. SWP can be done weekly, monthly, or quarterly as per the instructions. This method is usually preferred by retirees who need a steady income.

start-an-sip-today-watch-your-money-grow start-an-sip-today-watch-your-money-grow

Difference between SIP and SWP

The terms Systematic Investment Plan (SIP), Systematic Transfer Plan (STP), and Systematic Withdrawal Plan (SWP) may confuse investors if they aren't aware of these concepts or the difference between SIP and SWP or STP.

Investing in a mutual fund has proven to be one of the best methods to build a financial corpus. However, if you wish to take a systematic strategic approach, rather than putting lump-sum amounts, it is essential to know the major points of differences between SIP and SWP. Let us look into the detailed comparative study of SIP vs SWP

Benefits:

SIP investment is a method that builds disciplined investment habits. It helps spread your funds over a period of time to beat market volatility and, at the same time, provides rupee-cost averaging on your investments. It is considered one of the best wealth accumulation methods.

SWP provides the investor with a scope of regular income. The invested money can be redeemed at regular intervals, thus aiding with day-to-day financial needs. It also provides flexibility in terms of amounts to redeem and stop instructions to the investor.

Suitability:

SIP investments are suitable for investors who wish to save and invest regularly. For long-term wealth accumulation, this strategy suits bests. Also, for individuals who find it hard to invest a large chunk of the amount at one point, SIP can help with small investment amounts.

SWPs are more appropriate for individuals who are looking for a steady flow of income. It is typically preferred by senior citizens or retirees. However, it can also aid individuals with payment obligations such as paying monthly EMIs, paying for children's school/college fees, and other fixed expenses.

How it works:

The working of SIP is straightforward. An investor invests a particular amount at a particular interval, irrespective of market conditions. With the SIP strategy, you buy more units when the market is at a low and a higher number of units when the market is at a high. 

In order to calculate the benefit amount, SIP calculator is a useful online tool.

In SWP, the investor invests a large corpus in a mutual fund scheme initially. Later, he instructs the fund house to redeem a certain amount from the particular fund on a regular interval.

Tax implication:

SIP is a way of investment, unlike SWP, which is a way of withdrawal. So, tax on SIP is applicable (if any) when they are redeemed. Additionally, in the case of investments through SIP in ELSS, individuals can claim tax deductions under section 80C up to INR 1,50,000 per year.

In SWP, if the fund is a debt-oriented fund from which redemption is made, debt fund taxation rules will apply (holding of greater or lesser than 3 years). If the fund is equity-oriented, equity fund taxation will imply (holding of greater or lesser than 1 year).

SIP vs SWP:

SIP SWP
What Regular investments in mutual fund schemes Regular withdrawals from mutual fund schemes
Why Wealth accumulation A steady stream of income
Who Ideal for investors of all ages, especially young investors Ideal for retirees and senior citizens
How Money gets debited from your bank account to buy mutual fund units Mutual fund house sells your invested units to credit the money in your bank account

start-small-&-build-your-wealth-for-a-brighter-tomorrow start-small-&-build-your-wealth-for-a-brighter-tomorrow

Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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*under 10(10D)

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