SIP vs SWP - What is the Difference?

What are SIPs (Systematic Investment Plans)?

A Systematic Investment Plan (SIP) is a disciplined investment method that allows individuals to invest a fixed amount at regular intervals, such as monthly or quarterly, into mutual fund schemes. SIPs are designed to make investing accessible and convenient, especially for those who want to build wealth gradually without needing a large lump sum upfront. The minimum investment amount can be as low as ₹100, making SIPs suitable for investors across all income groups.​

Key Features of SIPs

• Regular Investments: SIPs encourage periodic investments, helping investors develop a habit of disciplined saving and investing.​
• Rupee Cost Averaging: By investing a fixed amount regularly, investors buy more units when the Net Asset Value (NAV) is low and fewer units when it is high, which helps average out the cost over time and reduces the risk of market timing.​
• Power of Compounding: SIPs leverage the power of compounding, where returns earned are reinvested, leading to exponential growth over the long term.​
• Flexibility: Investors can choose the amount, frequency, and duration of their SIP. They can also pause, increase, decrease, or stop their SIP based on their financial situation.​
• Professional Management: SIPs provide access to professionally managed mutual funds, where experienced fund managers make investment decisions based on market research and analysis.​

Benefits of SIPs

• Disciplined Investing: SIPs promote regular investment habits, which are crucial for long-term wealth creation and are considered part of the best SIP plans approach.
• Mitigates Market Volatility: By spreading investments over time, SIPs help reduce the impact of short-term market fluctuations.​
• Accessibility: With low minimum investment requirements, SIPs are accessible to a wide range of investors.​
• Goal Alignment: SIPs can be tailored to meet various financial goals, such as retirement planning, children's education, or buying a home.

SIP Calculator

I know my investment amount I know my goal amount

Monthly SIP Yearly SIP Lumpsum

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 ₹1.03 Cr

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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

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Monthly Investment ₹22.4 L

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Top Funds with High Returns (Past 7 Years)

12.96%

Equity Pension

15.9%

Opportunities Fund

18.4%

High Growth Fund

13.13%

Opportunities Fund

20.95%

Multi Cap Fund

14.05%

Accelerator Mid-Cap Fund II

15.9%

Multiplier

14.61%

Frontline Equity Fund

18.41%

Pension Mid Cap Fund

11.09%

Equity II Fund

14.6%

US Equity Fund

15.05%

Growth Opportunities Plus Fund

11.7%

Equity Top 250 Fund

14.11%

Future Apex Fund

12.01%

Pension Dynamic Equity Fund

14.4%

Pension Enhanced Equity

What is SWP (Systematic Withdrawal Plan)?

A Systematic Withdrawal Plan (SWP) is a facility offered by mutual funds that allows investors to withdraw a fixed amount at regular intervals from their existing mutual fund investments. SWPs are particularly useful for individuals who need a steady income stream, such as retirees or those with recurring expenses. Instead of redeeming the entire investment at once, SWP enables investors to withdraw a portion while the remaining corpus continues to grow.​

Key Features of SWP

• Regular Income: SWP provides a systematic way to generate regular income from mutual fund investments, making it ideal for retirees or those needing periodic cash flow.​
• Flexibility: Investors can choose the withdrawal amount and frequency (monthly, quarterly, etc.) based on their needs.​
• Continued Growth: The remaining invested amount continues to earn returns, helping preserve the corpus for future needs.​
• Tax Efficiency: SWP withdrawals are subject to capital gains tax, which can be more tax-efficient compared to other income sources, depending on the holding period and fund type.​

Benefits of SWP

• Steady Cash Flow: SWP ensures a regular income stream without liquidating the entire investment.​
• Flexibility: Investors can adjust the withdrawal amount and frequency as per their changing needs.​
• Saving Corpus: The remaining investment continues to grow, providing a safety net for future expenses.​
• Tax Efficiency: SWP withdrawals are taxed as capital gains, which can be advantageous for long-term investors.

Difference Between SIP vs SWP

Which is Better: SIP or SWP?

SIP and SWP serve complementary roles rather than being alternatives. SIP is better for those looking to steadily accumulate wealth over time. SWP suits those who have already built a corpus and seek systematic income without liquidating the entire investment at once. Investors can use SIP to build their portfolio and switch to SWP later for income generation, tailoring strategies based on their life stage and financial goals.

Conclusion 

SIP and SWP are complementary mutual fund strategies serving different goals. SIP helps investors steadily build wealth by investing fixed amounts regularly, benefiting from rupee cost averaging and compounding. SWP, designed for income generation, lets investors withdraw fixed sums periodically from their existing corpus while the remaining investment continues to grow. Using SIP to accumulate funds and SWP to withdraw income provides a balanced approach tailored to different life stages and financial needs.