SIP vs SWP vs STP: Which route should you take?

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Money9 Helpline seeks to help individuals address their personal finance queries. On this episode, Viral Bhatt, founder, MoneyMantra, answers questions to help clear doubts of readers.

Excerpts:  

Mukesh Gupta: I’m 42 and work in the private sector. I don’t have a retirement plan but have kept a lump sum amount for the purpose. Should I invest it via SIP or STP?

Bhatt: I think you should not think about SIP but rather you should go for SWP, because if you are investing in it, you can receive a fixed amount as a pension. Whatever age you have decided for your retirement, let’s assume it as 60, so at that age you will receive a corpus as pension. As you are working in the private sector you won’t be getting any pension so you can use this amount as a pension amount after the age of retirement, so you can use the strategy of SWP to fulfil the requirement of pension.

Rohit Sharma: The fund that I am investing in is not performing well and I want to stop SIP in the fund. Is it possible to STP from one equity fund to another equity fund of the same AMC?

Bhatt: Whenever you go for STP it is only possible within the funds of the same fund house, you cannot choose another fund from another fund house, you can definitely switch between the funds, generally it is for switching from debt to equity fund but you can also switch from equity to equity of the same AMC.