SWP in mutual funds offers a smart way to generate regular income in India. Short for Systematic Withdrawal Plan, it’s perfect for retirees or anyone needing cash flow. How does it work? Let’s explore the basics.
What Is SWP?
Systematic Withdrawal Plan (SWP) in mutual funds is a popular investment strategy for investors seeking regular income. It lets you withdraw a fixed amount periodically—monthly, quarterly, or yearly. You invest a lump sum in a mutual fund, then set a withdrawal schedule. For instance, withdrawing ₹10,000 monthly from a ₹10 lakh fund keeps the rest growing. It’s the opposite of SIP, focusing on payouts.
How Does SWP Work?
With SWP, investors choose a mutual fund scheme and decide the amount they want to withdraw regularly. For instance, if you invest ₹10 lakh in a mutual fund with an SWP of ₹10,000 per month, you’ll receive ₹10,000 monthly from your investment. The withdrawals continue as long as the invested amount remains, or until the investor decides to stop the plan.
Benefits of SWP:
- Regular Cash Flow: A key perk of SWP in mutual funds is steady income. Retirees love it for pension-like withdrawals. Unlike fixed deposits yielding 6-7%, per the Economic Times, SWP from equity funds can tap into 12-15% long-term returns, per SEBI data. In addition, you control the amount and timing.
- Flexibility and Tax Efficiency: SWP in mutual funds offers flexibility—you can adjust or stop withdrawals anytime. Tax-wise, only the gains portion is taxed. For equity funds, Long-Term Capital Gains over ₹1 lakh are taxed at 10%. Debt fund SWPs align with your slab rate. Moreover, mutual fund assets hit ₹50 lakh crore in 2023, per IBEF, showing their reach.
SWP Vs. SIP: Key Differences:
While a Systematic Investment Plan (SIP) is used to invest in mutual funds, an SWP allows you to withdraw from your mutual funds. Both have their advantages: SIP is for building wealth, while SWP is for generating regular income.
For more information on investing strategies, explore our article on mutual fund SIPs.
Conclusion:
SWP in mutual funds suits those balancing income and growth. It works with equity, debt, or hybrid funds, matching your risk level. Learn more at the SEBI website. In conclusion, SWP turns investments into a reliable income stream. It’s simple, tax-smart, and adaptable. Ready to plan your cash Flow? Explore more investment insights now!
– Ketaki Dandekar (Team Arthology)
Read more about SWP in Mutual Funds here – https://groww.in/systematic-withdrawal