A Systematic Withdrawal Plan (SWP) allows investors to withdraw a fixed amount from their mutual fund investment every month while the remaining money continues to grow. This makes SWP ideal for generating a steady monthly income without withdrawing the entire investment.
SWP works by redeeming a certain number of units every month equal to your withdrawal amount. The remaining units continue to stay invested and earn returns. This creates a balance between regular income and wealth growth.
Remaining Corpus = Previous Corpus × (1 + Monthly Return) – Monthly Withdrawal
Example Scenario:
Your SWP would run for 120 months, where each month:
Yes, SWP gives fixed monthly income while keeping your money invested.
Yes, if monthly withdrawal is higher than monthly returns, the corpus may run out early.
SWP can be more tax-efficient and may offer higher long-term growth.