A Systematic Withdrawal Plan (SWP) is the opposite of a SIP. Instead of investing regularly, you withdraw a fixed amount from your mutual fund investment at regular intervals.

How SWP Works

Say you have ₹10 lakh invested in a mutual fund. You set up an SWP of ₹10,000 per month. Each month, the fund sells units worth ₹10,000 and transfers the money to your bank account. The remaining investment continues to grow (or decline) based on market performance.

Who Should Use SWP?

  • Retirees who need regular income
  • Investors who want passive income
  • Those who have accumulated a corpus and want to draw from it

Advantages of SWP

  • Regular income stream
  • Remaining investment stays invested and can grow
  • More tax-efficient than withdrawing all at once
  • Customizable withdrawal amount and frequency

Things to Consider

  • If withdrawals exceed returns, your corpus will deplete over time
  • Market downturns can accelerate corpus depletion
  • Choose withdrawal rate carefully (typically 4-6% per year is sustainable)

SWP vs Dividend

SWP gives you more control over the amount and timing. Dividends are not guaranteed and depend on the fund house.

Disclaimer: This article is for educational purposes only.