Mutual Funds · beginner
SIP, STP and SWP — How They Work
How a Systematic Investment Plan works: instalments, units and average cost, SIP versus lump sum, compounding and step-ups, goal arithmetic with assumed rates, rules at different stages of life, common misunderstandings, tax, and how SIP, STP and SWP differ.
- 01What is SIP & How It WorksA Systematic Investment Plan (SIP) invests a fixed amount in a mutual fund scheme at fixed intervals. This lesson explains how each instalment is collected and turned into units, what each scheme sets for itself, and what a SIP does not promise.
- 02SIP vs Lump Sum InvestmentA lump sum buys units on one day; a SIP spreads its purchases over many days. This lesson shows with simple arithmetic why the outcome depends on the path of the NAV, and how a Systematic Transfer Plan staggers a lump sum.
- 03How Compounding Works in a SIPCompounding is growth earning further growth. This lesson shows how it works inside a SIP, the conventions every illustration has to state, what the checked arithmetic says, and why none of it is a forecast.
- 04Rupee-Cost Averaging: Units and Average CostA fixed SIP instalment buys more units when the NAV is lower and fewer when it is higher. This lesson works out the average cost per unit, shows why it sits at or below the simple average of the NAVs, and explains what averaging does not do.
- 05Step-Up SIP, Trigger SIP & Other VariantsFund houses offer variations on the level SIP: step-up, trigger, pause and SIPs with no end date. This lesson explains what each does, the arithmetic of a step-up, and why these are fund-house facilities whose terms differ.
- 06Common Misunderstandings About SIPsSeveral common beliefs about SIPs do not match how they work. This lesson takes them one at a time: assured returns, market risk, stopping a SIP, starting early, past performance and minimum amounts.
- 07SIPs at Different Life Stages: Rules to KnowA SIP works the same way at any age, but some rules matter at particular stages of life. This lesson covers a minor's folio at 18, the PAN exemption for small SIPs, the riskometer, and withdrawals through an SWP.
- 08SIP Taxation — STCG, LTCG, ELSSEach SIP instalment is a separate purchase with its own holding period, so tax on redemption is worked out instalment by instalment. This lesson sets out the rules for equity-oriented schemes, schemes mainly in debt, and ELSS, with rates as of October 2026.
- 09SIP, STP and SWP ComparedSIP, STP and SWP are three ways of transacting at fixed intervals: into a scheme, between schemes, and out of a scheme. This lesson compares them, shows which transactions are redemptions for tax, and works through how an SWP uses up units.
- 10Goal-Based SIPs: The ArithmeticLinking a SIP to a goal is a two-step estimate: an assumed inflation rate turns today's cost into a future cost, and an assumed rate of return turns that cost into a monthly instalment. This lesson shows both steps and why the answer is an estimate.