Do you know 3s of Financial Planning?

Today I want to explain 3 very common terms used in mutual fund investing which is also called 3 S of Financial Planning.

  1. Systematic Investment Plan (SIP)
  2. Systematic Transfer Plan (STP)
  3. Systematic Withdrawal Plan (SWP)

These are methods of Systematic investing and withdrawal in mutual funds. While most people know what is SIP is, majority are not aware of what STP & SWP is. These are important element of financial planning. So let’s understands how these 3 S works.

Systematic Investment Plan (SIP) 

What is SIP & How it works?

This option is similar to like Recurring Deposit in bank or post office.. Under this option you can invest fixed amount in mutual funds on particular date of the month. You can fix the amount according to your financial goals as well as you can select date also and invest it regularly. When you invest for the first time in mutual funds you would get folio number like your bank account number. Your money is auto debited (ECS) from bank account or you can give postdated cheques .After purchase in particular scheme you will get certain number of units based on the ongoing market rate which is called NAV of the day. Every time you invest money, additional units of the schemes added to your account. Whenever you make an investment in mutual fund scheme, the fund house has to send you an account statement providing details of holding.

Advantage of Systematic Investment Plan

  • It help to develop saving habits.
  • One can start investing in SIP with very low amount of Rs.500 or Rs. 1000
  • While Starting SIP, you have to choose date and no of installments-you can choose whatever is convenient for you.
  • There is no fixed tenor for running SIP ,Once the SIP tenure is fixed ,it can stopped in between or could be continued even after the tenor by placing the request with respective mutual fund company.
  • Full and Partial withdrawal is possible during or after the SIP tenor .Only ELSS mutual funds have 3 years lock in period and there is some exit load in some mutual fund schemes depending upon type of the scheme.
  • Simple, Convenient and easy to monitor. You do not have to take time from your schedule to make your investments. With a completed application form, one can just submit post-dated cheques or avail the Easy Pay (auto debit) ** facility and relax. You can monitor your progress of investment through periodic statement of accounts.
  • Rupee cost averaging: Investors investing fixed amount of money every month towards any investment vehicle allow them to buy more units or stocks when the price of the units (investment) is lower. This reduces the average cost of purchasing of the financial asset over time.Considaring a long term investment approach ,rupee cost averaging can even out any market ups and down in the long term, allowing investor to gain maximum benefits on his on her investments over time.


Month Investment Amount             NAV     No.Of Units
JAN           2000             15          133.33
FEB           2000             13          153.84
MAR           2000             16          125.00
APR           2000             14          142.85
MAY           2000             17          117.64
JUNE           2000             19          105.26

Total Units                                                                                                                        777.92

From above table we can see at every market correction an investor would end up buying more number of units. When the unit price goes up, he tends to gain.

What are documents required for SIP investment?

You need to provide KYC documents along with SIP application form .KYC documents include PAN card, address proof and identity proof.


 Mutual Fund Investments are subject to market risk ,read all scheme related documents carefully.  

Next Article will be on 2nd S …Systematic Transfer Plan


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