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Market Intelligence › Basic Terminologies
The mechanism of systematic withdrawal and transfer, and which one suits which purpose
Published by The Retail Trader · JUL 31, 2026 · Mutual Funds & AMC
A SIP is the systematic way to put money in. It has two siblings — SWP for taking money out, and STP for shifting from one fund to another. All three share the same logic: decide once, execution is automatic.
In an SWP, a fixed amount arrives in your bank every month. To fund it, as many units are redeemed as are needed at that day's NAV.
In an STP, a fixed amount moves every month out of one scheme and into another, often from debt towards equity.
They are generally used in these situations:
• An SWP for regular income after retirement, because there the control is yours.
• An STP to put a large amount into equity gradually.
• An STP also to shift from equity to debt as a goal approaches.
• In both, every transaction is a redemption — which means both tax and load can apply.
If the SWP amount is set higher than the portfolio's growth, the corpus slowly runs out — that is not a flaw, just arithmetic. Deciding the withdrawal rate in advance is the real decision in this whole mechanism.
This article is for educational purposes only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics are changed by the exchanges, SEBI and RBI from time to time, so verify every number yourself with your broker or the official source.