STP or SIP? What is better?
- Vipin Bihari Shukla
Systematic Transfer Plan (STP) and Systematic Investment Plan (SIP) serve different purposes.
You start a STP when you have a lumpsum to invest and you want to invest it over a period of time to average the purchase cost and rule out of the risk of getting into the market at its peak. Depending on the lumpsum amount, the investor can decide over what period he wants to deploy the money in the market. Typically, a large amount is deployed over a longer period of time. Investors use weekly or monthly STP for this purpose.
SIP, on the other, is started by individuals who don't have a lumpsum to invest, but want to invest a particular amount every month in the market. This method also helps investors to average the purchase cost over a long period time and maximise returns.
This article was originally published on October 26, 2015.
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