Most of us are aware of Systematic Investment Plan (SIP). Opposite of SIP is Systematic Withdrawal Plan (SWP). It is a systematic plan that allows investors to plan cashflows for their financial goals and needs.

Through SWP, you can withdraw a pre-determined amount from a mutual fund scheme where you have invested to your bank account at regular intervals. The facility offered by fund houses may be helpful for investors who want a regular and fixed amount of money from their past investments.

Besides withdrawing a fixed sum of money, the remaining amount in the scheme post withdrawals has the potential to grow.

SWP Options

Depending on your requirement, you have the option to customise your systematic withdrawal plans. Fund houses offer fixed withdrawal option and appreciation withdrawal option to their investors. In fixed withdrawal option, you can withdraw a specific amount from your scheme that is automatically transferred to your bank account. If you are looking to keep your capital that you have invested intact but want to withdraw only your gains/appreciation, you can opt for the appreciation withdrawal option.

How to use SWP in your day-to-day life?

The systematic withdrawal process can help to manage your money and fulfil your financial goals in our everyday life:

Children’s education: You may need to pay your child’s higher education fees on a monthly or quarterly basis. So, if you have accumulated the required amount, you can set up an SWP to manage your child’s regular fees payment requirement.

Sabbatical: SWP can help you take care of your daily expenses when you have taken a sabbatical or a career break.

EMIs: Paying monthly instalments on time is very important. Delay in loan payment or inability to pay loans can hurt your credit score. To make sure that your EMIs are paid on time, irrespective of your financial condition, you can set up an SWP. In addition to the accumulated investments, you can invest your bonus and other onetime payments in a suitable debt fund of your choice and opt for SWP facility that may take care of your EMI needs.

Monthly expenses for freelancers and self-employed: Unlike a full-time employee, freelancers and self-employed individuals do not have a fixed monthly income. If you do not earn a fixed sum of money, you can invest your earnings as and when you receive it in a suitable debt fund and then can opt for the SWP facility to manage your daily expenses.

Things to keep in mind before starting an SWP

• You need to accumulate the required corpus in the scheme before setting up the SWP.

• The value/units of the fund will decrease after every withdrawal.

• As debt funds are comparatively less volatile than equity funds, you can accumulate your corpus in a debt fund such as liquid fund.

Systematic Withdrawal Plan is a facility that allows investors to withdraw a fixed sum of money at regular intervals from their earlier investments. If you are looking for a systematic way to withdraw money to manage your daily life and financial goals, you can set up an SWP in a mutual fund scheme of your choice.

For detailed terms & conditions and more details on the facility, please refer the Scheme Information Document of the respective schemes or contact the respective fund houses.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.