Last Updated:
SIP builds long-term wealth with regular investments, while SWP offers periodic income through systematic withdrawals, ideal for retirees. Both are mutual fund strategies.
SIP Vs SWP: Key differences in two investment strategies.
SIP vs SWP: SIP and SWP are two popular investment strategies designed to help you achieve your financial goals. While both involve regular transactions with mutual funds, they serve distinct purposes.
Systematic Investment Plan (SIP)
An SIP is ideal for long-term wealth creation. It encourages disciplined savings by investing a fixed amount in a chosen mutual fund at regular intervals. This approach helps average out the purchase cost over time, known as rupee cost averaging, and potentially mitigates the impact of market volatility. SIPs are suitable for investors aiming for long-term growth.
Systematic Withdrawal Plan (SWP)
Conversely, SWP is designed to provide regular income from your investments. It allows you to withdraw a fixed amount from your mutual fund at regular intervals. While it offers a steady cash flow, it’s crucial to remember that SWP withdrawals are subject to market fluctuations and the performance of the chosen fund. SWPs are particularly beneficial for retirees or individuals seeking periodic income from their investments.
Understand Key Differences And Features:Â
| Feature | SIP (Systematic Investment Plan) | SWP (Systematic Withdrawal Plan) |
| Purpose | Helps in wealth creation by investing regularly | Provides regular income by withdrawing systematically |
| Function | Invests a fixed amount at regular intervals | Withdraws a fixed amount at regular intervals |
| Best for | Investors looking for disciplined savings and long-term growth | Retirees or investors needing periodic income |
| Cash Flow | Outflow from the investor’s bank to the mutual fund | Inflow to the investor’s bank from the mutual fund |
| Market Impact | Benefits from rupee cost averaging | Affected by market fluctuations and fund performance |
| Taxation | Equity SIP: LTCG (10% over ₹1 lakh); Debt SIP: Taxed as per tenure | Equity SWP: Taxed as capital gains; Debt SWP: Taxed as per holding period |
| Flexibility | Can start, stop, or modify the amount anytime | Can set fixed withdrawals or customize them |
| Goal | Long-term wealth accumulation | Regular income while maintaining investments |
