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What is Systematic Withdrawal Plan (SWP)? Key things to know

Systematic Withdrawal Plan (SWP) is a facility with which a person can ascertain a fixed amount of income at periodic intervals from the mutual fund folio or an investment portfolio of sizeable quantum. Under the Systematic Withdrawal Plan,
a person can opt either monthly, quarterly or semi-annual withdrawals. SWP is equally opposite of Systematic Investment Plan (SIP) under which there is a periodic requirement of deposits.

SWPs are best suited after retirement and in case of seasonal unemployment. With every withdrawal from the portfolio, the total deposit amount shrinks following which the interest income or the return, in absolute terms, also reduces.

SWP facility can be availed on any kind of portfolio, be it a mix of term deposits and mutual fund schemes or stocks and bonds or fixed income securities and other market-tradable securities. The investments can be made according to the respective risk-taking capacities and return expectancy of a person. 

If a person is risk-averse then an upper limit can be fixed on equity and equity-related assets and the maximum portion of funds can be set aside for investment in debt assets, balanced mutual fund schemes, index funds, long-term fixed deposit options available in banks and post offices. Under the SWPs, a person can withdraw pre-determined quantum from the investment corpus at set intervals much like a salaried payout from an employer.

Systematic Withdrawal Plans can turn out extremely good for persons with huge income streams which is received in instalments or income received from multiple sources. A person can comfortably withdraw the interest income from a fixed deposit account every month. The withdrawal of interest income can be partial or complete which is dependent on the specific requirement.

A person with annual rental income of more than Rs 50 lakhs can easily start an SWP upon investing the money in a portfolio of several assets such as mutual funds, bank deposits, stocks, or can invest the total funds in bank deposits of mutual fund schemes. 


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