Mutual Funds Dekho

What is SWP

A systematic withdrawal plan (SWP) refers to a strategy where an investor withdraws a fixed amount of money at regular intervals from a scheme of mutual fund, where he/she has invested. This plan is suggested to individuals, who are looking for regular income from their investments while benefiting from the investment in the mutual fund scheme.

Are you worried about the monthly cash flow? Do you want higher tax adjusted return?

Do you want grow your Investment while getting Monthly cash Flows in your Account?

Here is the solution, Yes…its SWP.

We have seen many people searching for monthly cash flow for their monthly expenses. Most of the time people landed with the lower Tax adjusted returns, in instrument like FD, MIS & Traditional Plans of Insurance etc, those even don’t beat the Rate of Inflation year on year bases.

How SWP works?

“A” has ₹ 10,000,000/- and needs ₹ 75,000/- per month for his/her monthly expenses, also want his investment should also grow by with some rate.

Now, “A” invests in a scheme which may deliver 12% p.a. (assumed rate of return on investment) & gives request for systematic withdrawal plan, for a fixed sum of ₹ 75,000/- every month.

See the power of Systematic Withdrawal Plan, “A” has withdrawn Rs.9,000,000 for his/her monthly expenses in 10 years & has Rs. 14,400,000/- as outstanding corpus. (Refer the table below)

Initial Investment	₹10,000,000.00
Total Withdrawal	₹9,000,000
Outstanding Valuation after Withdrawal	₹14,413,729
-	-	-
-	-	-
Month	Withdrawal Per Month	Outstanding Valuation after Withdrawal
0		₹10,000,000
1	₹75,000	₹10,019,888
2	₹75,000	₹10,039,965
3	₹75,000	₹10,060,232
4	₹75,000	₹10,080,691
5	₹75,000	₹10,101,345
6	₹75,000	₹10,122,194
7	₹75,000	₹10,143,242
8	₹75,000	₹10,164,489
9	₹75,000	₹10,185,938
10	₹75,000	₹10,207,590
11	₹75,000	₹10,229,448
12	₹75,000	₹10,251,513
13	₹75,000	₹10,273,787
14	₹75,000	₹10,296,273
15	₹75,000	₹10,318,972
16	₹75,000	₹10,341,887
17	₹75,000	₹10,365,019
18	₹75,000	₹10,388,370
19	₹75,000	₹10,411,943
20	₹75,000	₹10,435,740
21	₹75,000	₹10,459,763
22	₹75,000	₹10,484,013
23	₹75,000	₹10,508,494
24	₹75,000	₹10,533,207
25	₹75,000	₹10,558,154
26	₹75,000	₹10,583,338
27	₹75,000	₹10,608,761
28	₹75,000	₹10,634,426
29	₹75,000	₹10,660,334
30	₹75,000	₹10,686,487
31	₹75,000	₹10,712,889
32	₹75,000	₹10,739,542
33	₹75,000	₹10,766,447
34	₹75,000	₹10,793,608
35	₹75,000	₹10,821,026
36	₹75,000	₹10,848,704
37	₹75,000	₹10,876,645
38	₹75,000	₹10,904,852
39	₹75,000	₹10,933,326
40	₹75,000	₹10,962,070
41	₹75,000	₹10,991,086
42	₹75,000	₹11,020,379
43	₹75,000	₹11,049,949
44	₹75,000	₹11,079,799
45	₹75,000	₹11,109,933
46	₹75,000	₹11,140,353
47	₹75,000	₹11,171,062
48	₹75,000	₹11,202,061
49	₹75,000	₹11,233,356
50	₹75,000	₹11,264,947
51	₹75,000	₹11,296,837
52	₹75,000	₹11,329,031
53	₹75,000	₹11,361,529
54	₹75,000	₹11,394,337
55	₹75,000	₹11,427,455
56	₹75,000	₹11,460,888
57	₹75,000	₹11,494,638
58	₹75,000	₹11,528,708
59	₹75,000	₹11,563,102
60	₹75,000	₹11,597,822
61	₹75,000	₹11,632,871
62	₹75,000	₹11,668,253
63	₹75,000	₹11,703,970
64	₹75,000	₹11,740,027
65	₹75,000	₹11,776,426
66	₹75,000	₹11,813,170
67	₹75,000	₹11,850,262
68	₹75,000	₹11,887,707
69	₹75,000	₹11,925,507
70	₹75,000	₹11,963,666
71	₹75,000	₹12,002,186
72	₹75,000	₹12,041,073
73	₹75,000	₹12,080,328
74	₹75,000	₹12,119,956
75	₹75,000	₹12,159,959
76	₹75,000	₹12,200,343
77	₹75,000	₹12,241,109
78	₹75,000	₹12,282,263
79	₹75,000	₹12,323,807
80	₹75,000	₹12,365,745
81	₹75,000	₹12,408,081
82	₹75,000	₹12,450,818
83	₹75,000	₹12,493,962
84	₹75,000	₹12,537,514
85	₹75,000	₹12,581,480
86	₹75,000	₹12,625,863
87	₹75,000	₹12,670,667
88	₹75,000	₹12,715,897
89	₹75,000	₹12,761,555
90	₹75,000	₹12,807,647
91	₹75,000	₹12,854,176
92	₹75,000	₹12,901,147
93	₹75,000	₹12,948,563
94	₹75,000	₹12,996,429
95	₹75,000	₹13,044,750
96	₹75,000	₹13,093,528
97	₹75,000	₹13,142,770
98	₹75,000	₹13,192,479
99	₹75,000	₹13,242,660
100	₹75,000	₹13,293,317
101	₹75,000	₹13,344,454
102	₹75,000	₹13,396,077
103	₹75,000	₹13,448,190
104	₹75,000	₹13,500,797
105	₹75,000	₹13,553,903
106	₹75,000	₹13,607,513
107	₹75,000	₹13,661,632
108	₹75,000	₹13,716,265
109	₹75,000	₹13,771,415
110	₹75,000	₹13,827,089
111	₹75,000	₹13,883,292
112	₹75,000	₹13,940,028
113	₹75,000	₹13,997,302
114	₹75,000	₹14,055,119
115	₹75,000	₹14,113,485
116	₹75,000	₹14,172,405
117	₹75,000	₹14,231,884
118	₹75,000	₹14,291,928
119	₹75,000	₹14,352,541
120	₹75,000	₹14,413,729

Benefits of SWP

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

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.
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.
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.
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.
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.
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.
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.