SIP vs STP: Which Works Better for Your Lump Sum?

• SIP is for regular, effortless investing from monthly income; STP is for deploying a lump sum by parking it in a liquid fund and gradually transferring to equity.
• STP offers higher returns on uninvested capital (liquid fund ~6%) compared to SIP's savings account (savings account ~3%), leading to slightly higher capital gains.
• SIPs naturally catch long-term market corrections due to ongoing contributions, while STPs are limited by their initial chosen period, potentially missing later dips.
• Taxation differs: SIPs are taxed upon redemption, with each contribution treated as a fresh investment; STPs incur capital gains tax on each transfer out of the source fund.
• SIP is ideal for salaried individuals building wealth consistently, while STP is suited for deploying a lump sum to avoid market timing.

Why It Matters: The choice between SIP and STP dictates how your lump sum grows.