A 💼 Systematic Withdrawal Plan (SWP) might be your perfect solution!
🔍 What is an SWP?
A Systematic Withdrawal Plan (SWP) is an option offered by mutual funds that allows investors to withdraw a fixed amount at regular intervals — such as monthly, quarterly, or annually — from their existing mutual fund investments.
Unlike traditional interest-earning products like Fixed Deposits (FDs), in an SWP, a specific number of mutual fund units are redeemed periodically to provide you with income. This approach ensures regular cash flow while your remaining investment continues to grow.
In essence, an SWP helps you create your own steady income stream, much like a personalized pension.
⚙️ How Does SWP Work?
An SWP works by automatically redeeming mutual fund units at a frequency and amount chosen by you — providing regular payouts from your investment.
📌 Example:
You invest ₹10,00,000 in a mutual fund.
You set up an SWP to withdraw ₹20,000 every month.
Suppose the NAV (Net Asset Value) of the fund is ₹20.
To give you ₹20,000, the fund will redeem 1,000 units (₹20,000 ÷ ₹20 NAV).
These ₹20,000 will be credited to your bank account.
The remaining investment continues to stay invested, potentially earning market-linked returns.
This process continues until the chosen duration ends or your investment corpus is exhausted.
Benefits of SWP:
✅ Regular Income
Acts like a salary or pension – perfect for retirees or people with no regular earnings.
✅ Tax Efficiency
You pay capital gains tax only on the withdrawn portion (not full amount).
Equity Funds: LTCG tax of 10% after ₹1 lakh exemption (if held >1 year)
Debt Funds: As per slab rate (post indexation for long term)
✅ Better Than FD in Some Cases
Because FDs tax interest fully and lock your money. SWPs are more flexible and tax-smart.
✅ Compounding Benefits
Your remaining corpus continues to grow — generating more wealth over time.
✅ Avoids Market Timing
Prevents large redemptions during market crashes. Spreads out the withdrawal risk.
📌 Best Suited For:
👴 Retired Individuals
Need regular income from their investments
Prefer stability and capital preservation
👨👩👧👦 Parents Funding Education or Expenses
Want to cover school/college fees or family expenses in a planned manner
💼 Professionals Taking a Career Break or Early Retirement
Looking for income during non-earning periods
💰 Investors Seeking Tax-Efficient Withdrawals
Want better post-tax returns than fixed deposits or traditional income options
🧘♂️ Conservative Investors
Want peace of mind with predictable cash flows while keeping their capital invested.