What is SWP

Systematic Withdrawal Plan (SWP) in mutual funds, it means you are systematically withdrawing a predetermined amount from your investment at regular intervals.

the lower after Tax returns- the lower Post Tax returns

A has Rs. 10000000/- - A has Rs. 10000000/- ( One Crore Rs.)

Now, A invests in a Scheme which may deliver 12% p.a. (Assumed). Now A has started getting a fixed sum of Rs. 75000/- p.m. in his/her bank account every month. Now see the below table how is his/her Investment perform @ 12% p.a. in next 10 Years.

Assumed Rate of Return: 12% p.a.

Benefits of SWP

Systematic Withdrawal Plan (SWP) in mutual funds offers several benefits:

1. Regular Income: SWP allows investors to receive a regular stream of income from their mutual fund investments. This can be particularly beneficial for retirees or individuals seeking a predictable income stream to meet their living expenses.

2. Dollar-Cost Averaging: SWP can employ the concept of dollar-cost averaging in reverse. Instead of investing a fixed amount regularly, you're withdrawing a fixed amount. This strategy can help mitigate the impact of market volatility on your withdrawals, potentially reducing the risk of selling a significant portion of your investment during market downturns.

3. Discipline: SWP instills financial discipline by establishing a systematic approach to withdrawals. Having a predetermined withdrawal schedule can prevent impulsive decisions based on short-term market fluctuations.

4. Convenience: SWP automates the withdrawal process, making it convenient for investors. Once set up, withdrawals occur automatically according to the specified schedule, reducing the need for manual intervention.

5. Flexibility: While SWP provides a structured approach to withdrawals, investors can still customize the frequency and amount of withdrawals according to their financial needs. This flexibility allows investors to tailor their withdrawal strategy to align with their specific requirements.

6.Tax Efficiency: Depending on the jurisdiction and holding period, SWP withdrawals may benefit from tax advantages. For example, 10% (Over and Above Rs. 100000/- gain from Equity) long-term capital gains tax rates may apply to withdrawals from mutual funds held for a year or more, potentially reducing the tax burden on investment income.

7. Peace of Mind: Knowing that there's a steady stream of income from investments can provide peace of mind, especially during retirement or when relying on investments to cover living expenses.

Overall, SWP in mutual funds offers a convenient, disciplined, and potentially tax-efficient way to generate regular income from investments while managing market risks effectively.

Here is the solution, Yes…its SWP

We have seen many people searching for the monthly cash flow for their monthly expenses.

Most of the time people landed with the lower after Tax returns, which even don’t bet the Rate of Inflation even year on year bases, in instrument like FD, MIS, and Traditional Plans of Insurance etc.

How SWP works?

A has ₹ 10000000/- and need ₹ 75000/- per month for his/her monthly expenses & want his investment should also grow by some Rate.

Now, A invests in a Scheme which may deliver 12% p.a. (Assumed). Now A has started getting a fixed sum of ₹ 75000/- p.m. in his/her bank account every month.

Now see the below table how is his/her Investment perform @ 12% p.a. in next 10 Years.