What Is SWP in Mutual Funds?

SWP or Systematic Withdrawal Plan in Mutual funds allows investors to withdraw a fixed amount of money from their investment at regular intervals, such as monthly, quarterly, or annually. While the remaining amount continues to stay invested and earn returns. Here we will explore what is SWP in mutual funds.

Benefits of SWP in Mutual Fund

Here are the benefits of SWP in a Mutual fund:

They facilitate investors by providing a regular income from their investment, so this becomes highly convenient and useful for those who need a regular cash flow to meet their regular expenses.
Here for the resident individual investor, so there is no TDS on the SWP amount.
The investor has the flexibility to choose the amount and frequency of the date according to their needs, so the investor can stop the SWP at any point in time or can also add further investment.
Here, if the SWP withdrawal rate is lower than the fund return, then the investor gets some capital appreciation too in the long term.

How does SWP work in Mutual Funds?

SWP works by allowing the investor to specify the withdrawal amount and frequency, so the fund manager can redeem the specified number of units from the investor's mutual funds, which are holding, and transfer the corresponding amount to the investor's bank account. So this process continues until the investor decides to stop the SWP or until the investment is exhausted.

For example, if you have invested in an XYZ mutual fund INR 20 lakhs and then set up the SWP to withdraw INR 20,000 every month, the fund manager will sell enough units each month to generate the INR 20,000. So the remaining investment continues to earn a return, which provides you with a steady income. Well, you can easily calculate SWP with the help of the SWP calculator.

Conclusion

In conclusion, an SWP in mutual funds is a financial tool for generating regular income while keeping your investment intact, so it is especially beneficial for income-seeker retirees, or anyone who aims for predictable cash flow/ We hope this blog has been helpful.

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Saniya

I am a writer, and this sentence speaks louder than anything, I love to play with words because I have a passion for writing easy and good-quality content that reflects simplicity. Readers like content that is straightforward with simple language. My priority has always been to deliver content that connects with the reader.

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