Systematic Transfer Plan (STP) and Systematic Withdrawal Plan (SWP) are powerful investment tools that allow you to invest or withdraw money from mutual funds in a disciplined and systematic manner. Groww, a popular investment platform in India, makes it incredibly easy to set up and manage both STP and SWP. This guide will walk you through the process step-by-step, helping you leverage these features for your financial goals. Understanding STP and SWP What is a Systematic Transfer Plan (STP)? A Systematic Transfer Plan (STP) is an investment strategy where you transfer a fixed amount of money from one mutual fund scheme to another on a regular basis (usually monthly). Typically, investors use STP to move money from a liquid fund or a debt fund to an equity fund. This strategy helps in: Rupee Cost Averaging: By investing a fixed amount regularly, you buy more units when the market is down and fewer units when the market is up, averaging out your purchase cost over time. Mitigating Volatility: Moving money gradually from a less volatile fund to a more volatile one helps reduce the risk of investing a lump sum at a market peak. Disciplined Investing: It enforces a disciplined approach to investing, preventing emotional decisions based on market fluctuations. What is a Systematic Withdrawal Plan (SWP)? A Systematic Withdrawal Plan (SWP) is the inverse of STP. It allows you to withdraw a fixed amount of money from your mutual fund investments at regular intervals (monthly, quarterly, etc.). SWP is ideal for: Generating Regular Income: Retirees or individuals needing a steady income stream can use SWP to supplement their earnings. Disciplined Profit Booking: It helps in systematically booking profits from your investments without timing the market. Managing Expenses: Individuals can set up SWP to cover regular expenses like rent, EMIs, or living costs. Starting an STP on Groww Groww offers a user-friendly interface to set up STPs. Here’s how you can do it: Eligibility for STP on Groww To start an STP on Groww, you generally need: A valid Groww account with KYC completed. Existing investments in a liquid fund or a debt fund from which you wish to transfer money. A target equity fund (or any other fund) where you want to invest the transferred amount. Documents Required for STP No specific documents are usually required to initiate an STP on Groww, as all your details are already registered during account opening. However, ensure your bank account details are updated for seamless transactions. Steps to Set Up an STP on Groww: Log in to your Groww account: Open the Groww app or website and log in. Navigate to your investments: Go to the 'Investments' or 'My Investments' section. Select the source fund: Choose the fund from which you want to transfer money (e.g., a liquid fund). Find the STP option: Look for an option like 'Transfer', 'STP', or 'Systematic Transfer'. Enter STP details: Target Fund: Select the fund you want to invest in (e.g., an equity fund). Transfer Amount: Specify the fixed amount you wish to transfer each month. Frequency: Choose the frequency (e.g., monthly). Start Date: Select the date on which you want the first transfer to occur. Duration (Optional): You can set a duration for the STP or let it run indefinitely until you stop it. Review and Confirm: Carefully review all the details and confirm the STP setup. Charges and Fees for STP on Groww Groww typically does not charge any additional fees for setting up or managing STPs. However, the underlying mutual funds may have their own expense ratios, which are deducted from the fund's assets. Interest Rates/Returns for STP STP itself doesn't have an interest rate. The returns depend on the performance of both the source fund (where money is parked temporarily) and the target fund (where money is invested). Debt funds generally offer lower, more stable returns, while equity funds offer higher potential returns with higher risk. Starting an SWP on Groww Setting up an SWP on Groww is as straightforward as setting up an STP. Eligibility for SWP on Groww To start an SWP on Groww, you need: A valid Groww account with KYC completed. Sufficient investment in a mutual fund scheme from which you want to withdraw money. A registered bank account for receiving the withdrawal amounts. Documents Required for SWP Similar to STP, no additional documents are typically required for SWP setup on Groww, provided your account and bank details are up-to-date. Steps to Set Up an SWP on Groww: Log in to your Groww account. Navigate to your investments. Select the fund for SWP: Choose the fund from which you want to make withdrawals. Find the SWP option: Look for an option like 'Withdraw', 'SWP', or 'Systematic Withdrawal'. Enter SWP details: Withdrawal Amount: Specify the fixed amount you wish to withdraw each interval. Frequency: Choose the frequency (e.g., monthly, quarterly). Start Date: Select the date for the first withdrawal. End Date (Optional): You can set an end date for the SWP or let it continue until you have sufficient units or stop it. Review and Confirm: Verify all the details and confirm the SWP setup. Charges and Fees for SWP on Groww Groww generally does not levy extra charges for SWP. The expense ratio of the mutual fund scheme will continue to apply. Interest Rates/Returns for SWP SWP does not have an interest rate. The withdrawal amount is paid out from your invested capital and any gains accrued. The returns of the underlying fund determine how long your investment can sustain the SWP, and the value of your remaining investment. Benefits of Using STP and SWP on Groww Convenience: Groww's platform simplifies the process, making it easy to set up and manage both STP and SWP. Discipline: Automates your investment and withdrawal strategy, promoting financial discipline. Flexibility: Allows you to choose amounts, frequencies, and dates according to your needs. Risk Management (STP): Helps mitigate the risk of lump-sum investing in volatile markets. Income Generation (SWP): Provides a steady income stream from your investments. Cost-Effectiveness: Groww's zero-commission model means you save on brokerage fees. Risks Associated with STP and SWP Risks with STP: Market Risk: The value of your investment in the target fund can fluctuate based on market performance. There is no guarantee of returns. Source Fund Performance: While generally less risky, the source fund's performance can still impact the amount available for transfer. Exit Load: If you redeem from the source fund within a specific period (e.g., 7 days for liquid funds), an exit load might apply. Risks with SWP: Depletion of Capital: If the withdrawal amount is higher than the fund's returns, your principal investment will be depleted over time. Market Volatility: If the market falls significantly, the value of your remaining investment will decrease, potentially shortening the duration your SWP can be sustained. Tax Implications: Withdrawals are subject to capital gains tax, depending on the holding period and the type of fund (equity or debt). FAQ about STP and SWP on Groww Q1: Can I set up an STP from a bank account to a mutual fund on Groww? No, Groww's STP functionality typically involves transferring funds between two mutual fund schemes you hold. To invest from your bank account regularly, you would set up a Systematic Investment Plan (SIP). Q2: How do I stop an STP or SWP on Groww? You can usually stop an active STP or SWP by navigating to the specific investment on the Groww platform, finding the STP/SWP management section, and selecting the 'Stop' or 'Cancel' option. Q3: What happens if the source fund in an STP runs out of money? If the source fund doesn't have enough units to cover the transfer amount, the STP might be partially executed or might stop, depending on the fund house's policy and the remaining
In summary, compare options carefully and choose based on your eligibility, total cost, and long-term financial goals.