How to set up SWP: Just as you invest regularly in mutual fund schemes through SIP, in the same way you can systematically withdraw your money deposited in mutual fund schemes with the help of SWP.
For regular income, people use bank fixed deposits, non-convertible debentures and small-savings schemes. Do you know that you can also earn regular income from mutual funds? While Systematic Investment Plan i.e. SIP is a way to take advantage of compounding and a disciplined way of investing, Systematic Withdrawal Plan i.e. SWP plays a big role in retirement planning. This is helpful for those who want regular income from their investment portfolio.
How to start SWP?
In SWP, the investor can decide the withdrawal amount, its frequency (monthly, quarterly, half yearly etc.) and the period. This is not only beneficial for retired people but is also good for those who want regular income. Planning is necessary for proper use of Systematic Withdrawal Plan . For this, it is important for you to know properly about your financial goals, risk appetite, investment strategy and tax aspects.
For whom is SWP more beneficial?
Moneycontrol spoke to Akhil Chaturvedi, Chief Business Officer, Motilal Oswal Asset Management, to know about SWP. Asked him about the way to start SWP. Also asked how much money can be withdrawn from it and what are the risks associated with it. Chaturvedi said that this is generally true for retired people. People who are nearing retirement can also think about starting SWP.
Big fund is necessary for SWP
He said that if an investor has big funds then he can start SWP. If your investment is currently going into mutual funds, then it would not be right for you to start SWP, because it will have a negative impact on the benefits of compounding. In SWP, the investor has to first decide how much portion of his funds he wants to use for SWP.
Facility to maintain capital in the long term
If an investor has invested in different market cycles, he can expect 13-14 percent gross returns in the long term. Even if you withdraw 8-9% annually, you still have scope to maintain your capital and continue its growth. All you have to do is maintain your investment. Also, you need to withdraw only that much money which is appropriate for your funds.
