A Systematic Withdrawal Plan (SWP) is a smart investment strategy that allows you to withdraw a fixed amount of money from your mutual fund investments at regular intervals — monthly, quarterly, or annually. It is the opposite of SIP, where you invest regularly. In SWP, you withdraw regularly.
SWP plan
SWP is especially useful for retired individuals or those looking for a steady income from their investments without withdrawing the entire amount at once.
Here’s a step-by-step explanation of how SWP works:
✅ Step 1: Invest a Lump Sum in a Mutual Fund:-
To begin an SWP, you must first invest a lump sum amount in a mutual fund of your choice. For example, ₹5 lakhs or ₹10 lakhs in a debt or balanced fund.
Tip: Conservative or low-risk funds are usually preferred for SWP.
✅ Step 2: Choose the SWP Option:-
You then register for the SWP facility with your mutual fund company or through an online platform.
You’ll need to specify:
Withdrawal amount (e.g., ₹10,000/month)
Frequency (monthly, quarterly, etc.)
Start date (e.g., 5th of every month)
Duration (how long you want the withdrawals to continue)
✅ Step 3: Units Are Sold Automatically
Every time a withdrawal is made, mutual fund units are sold based on the current NAV (Net Asset Value).
🧮 Example:
Withdrawal Amount = ₹10,000
NAV on that date = ₹50
Units Sold = ₹10,000 ÷ ₹50 = 200 units
If the NAV changes next month, the number of units sold will change too.
✅ Step 4: Money is Credited to Your Bank Account
The fund house will automatically transfer the withdrawal amount to your registered bank account on the selected date — just like getting a salary or pension.
No need to make requests every time — it’s automated!
✅ Step 5: Remaining Amount Stays Invested
The rest of your investment continues to grow in the mutual fund based on market performance. So your money still earns returns even while you withdraw part of it regularly.
Invest in SWP in mutual fund
📌 Real-Life Use Case:
Let’s say Mr. Sharma retired with ₹12 lakhs in a mutual fund. He starts an SWP of ₹15,000/month. Every month:
₹15,000 is credited to his bank account
Units are sold based on the current NAV
The remaining corpus keeps growing
This continues until he stops the SWP or the full amount is withdrawn.
Benefits of SWP(systematic investment plan)
✅ 1. Regular Income
SWP provides a fixed and steady income at regular intervals. It’s ideal for people who need monthly or quarterly cash flow, like retirees who don’t have a regular salary but want to meet their daily expenses.
👉 You can withdraw a fixed amount as per your need.
✅ 2. Flexibility in Withdrawal Amount and Frequency
With SWP, you have the flexibility to decide:
How much money you want to withdraw
How often you want to withdraw (monthly, quarterly, or annually)
👉 You can adjust the amount and frequency based on your changing needs.
✅ 3. Tax Efficiency
SWP can be tax-efficient, especially when compared to traditional fixed deposits. If you invest in equity mutual funds and hold them for more than a year, any capital gains will be taxed at a lower rate (long-term capital gains tax), making SWP a better option for tax planning.
👉 By staying invested longer, you can reduce tax liabilities.
✅ 4. Continued Investment Growth
While you’re withdrawing money regularly, the rest of your investment stays in the mutual fund and continues to grow. This allows you to get the benefits of both withdrawals and potential market returns.
👉 You can keep earning returns even while taking out money.
✅ 5. Reduces Risk of Lump-Sum Withdrawals
When you withdraw a lump sum amount from a large investment, you may miss out on potential returns. SWP helps you avoid this risk by letting you take small withdrawals over time.
👉 It helps you manage your money more wisely and avoid depleting your savings too quickly.
✅ 6. Easy to Set Up and Manage
Setting up SWP is simple and can be done online or through your mutual fund provider. Once set, your withdrawals happen automatically, and you don’t have to manually request them each time.
👉 It’s an automated and hassle-free process.
✅ 7. Helps Meet Financial Goals
SWP is useful for those who want to ensure that they have a regular source of income for specific goals, such as paying monthly expenses or funding education costs.
👉 It helps you stay on track with your financial goals.
⚠ Disadvantages of SWP (Systematic Withdrawal Plan)
While SWP (Systematic Withdrawal Plan) is useful for regular income, it also has some limitations and risks. Before choosing SWP, it’s important to understand its negative points:
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❌ 1. Capital May Get Depleted Over Time
If the withdrawal amount is too high, your investment may run out faster than expected, especially during market downturns. This is risky for people relying on SWP for long-term income.
👉 You may run out of money if you withdraw more than what your investment earns.
❌ 2. Market Risk Remains
Since SWP uses mutual funds (which are market-linked), your remaining investment is still affected by market ups and downs. If the market performs poorly, your fund value may drop, and you’ll need to sell more units for the same withdrawal amount.
👉 In bad markets, your capital can reduce quickly.
❌ 3. Tax on Withdrawals
Each withdrawal under SWP involves capital gains tax, depending on how long you’ve held the units:
Short-term capital gains are taxed at a higher rate.
Long-term capital gains may be tax-free up to ₹1 lakh/year but are taxable beyond that.
👉 Tax calculation can get a little complex.
❌ 4. Returns Are Not Fixed
Unlike fixed deposits or pensions, SWP does not give guaranteed returns. The income depends on market performance, so it may not be reliable for people needing stable and risk-free cash flow.
👉 If markets fall, your expected income may not be met.
❌ 5. Not Ideal for Short-Term Goals
SWP works best for long-term planning. If you want money for short-term needs, SWP may not give good results due to market volatility and tax implications.
👉 It’s better for retirement income than short-term emergencies.
Top plateforms to start SWP in india
Groww
zerodha coin
paytm money
ET money
kuvera
CONCLUSION
SWP is a powerful tool for managing post-retirement income or case flow needs. it gives you financial freedom while keeping your money invested and growing. it’s flexible, efficient, and smart way to convert your mutual fund investment into a regularly income source.
invest smartly. withdraw wisely. Enjoy financial freedom with SWP.
