Systematic Withdrawal Plan (SWP)

Systematic Withdrawal Plan is feature made available with Mutual Funds Investments whereby the investor can withdraw his investment systematically. Withdrawals can be made on a monthly, quarterly, semi-annual, or annual schedule. The holder of the plan may choose withdrawal intervals based on his or her commitments and needs.

If the investor has accumulated a sizeable amount and want to withdraw a fixed amount for a particular expenses/event, then in this case he can use the SWP facility Investor can either withdraw a fixed amount or redeem fixed number of units from the fund.

The advantage of this facility is that the investor withdraws only the required amount periodically, so the balance amount remains invested in the fund. This balance amount fetches return and so the corpus goes on increasing to some extent even after withdrawal from the fund. Further, systematic withdrawal plans allow account holders to access their money exactly when they need it. This makes it easier for account holders to carry out their financial plans and meet their goals.

The investor can very well use a combination of both SIP and SWP for the satisfaction of his goals. Let us assume that the investor has started an SIP of Rs 5,000 per month; so after a year it will become Rs 63,413. If he continuous investing into SIP and also withdraws Rs 10,000 every year, then the accumulated balance after the withdrawal becomes Rs 53,413, and this will become Rs 59,822 at 12 percent returns after one year plus the SIP investment will become Rs 63,413. The total balance will become Rs 1, 23,235. So the combination of SIP and SWP also works out to be a good strategy for an investor to satisfy his goals and to accumulate good corpus.

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