SWP Mutual Funds (2023): Your Money, Your Rules

Systematic Investment Plans (SIPs) are a hassle-free approach to increase your wealth over time by making tiny, regular investments. You’ve definitely heard of them. SIPs have been the preferred method for accomplishing long-term financial objectives and establishing financial security. But what about the opposing viewpoint? Does a methodical “withdrawal” tool as well? SWP mutual funds can help with that.

What is SWP Mutual Funds?

You can take systematic withdrawals from your mutual funds with the help of the Systematic Withdrawal Plan, or SWP mutual funds as it is known in the industry. You can select the duration, frequency, and quantity of your withdrawals in an SWP based on your needs. The systematic withdrawal plan (SWP) offers a consistent source of income. The primary benefit of SWP mutual funds is that it is especially helpful for retirees and other individuals who wish to have a reliable source of income.

The following are some crucial components of a methodical withdrawal plan:

  • offers a consistent flow of money.
  • Reinvest your investment units in a methodical manner at predetermined intervals.
  • You have control over the SWP mutual funds’s duration, frequency, and beginning and ending dates.
  • Either the entire capital appreciation or a set amount may be withdrawn.

How Does a Systematic Withdrawal Plan Work?

Let’s look at an example to help you understand how a systematic withdrawal strategy operates.

In order to ensure a consistent income flow, let’s say you have put Rs. 1,00,000 in a mutual fund. You would like to withdraw a certain amount each month. As a result, you decide to open an SWP mutual fund account that would enable you to withdraw Rs. 5,000 on a specific day every month. The Net Asset Value (NAV) of each mutual fund unit is Rs. 20.

Setting up a systematic withdrawal plan (SWP) also gives you the option to direct the fund house to release money on a regular basis (typically monthly, quarterly, or annually). As a result, these money are moved to your bank account.

Let’s now examine how the return on investment for SWP mutual funds is calculated.

Things to Take Into Account in India 2023 Before Investing in SWP mutual funds

Prior to choose the finest systematic withdrawal plan and investing in SWP schemes, it is important to consider a few important considerations. As you ensure that the mutual fund firm you have chosen is reliable, first establish your financial objectives and the reason behind your SWP plan.

Next, examine how consistently it meets its goals and how it has produced SWP returns. Check out any fees and charges that might apply. 

Salary: Select SWP only in cases when it makes the most sense given your monthly income. One SWP variant is the well-known monthly systematic withdrawal plan. It is entirely up to you to consciously decide against receiving payments on a monthly basis in favor of a lump-sum withdrawal.

Pension: If you would like to expand the amount of your retirement corpus, you can also choose the finest SWP in mutual funds. A well-thought-out SWP invested in mutual funds can be a great way to get a monthly income after retirement.

Exit Load and Expenses: Pay attention to the fund’s expenditure ratio and exit load. Reduced expenses can raise your SWP returns, and minimal exit loads can be helpful if you must make an early withdrawal.

Tax Implications: Recognize the tax ramifications of your systematic withdrawal plan, including the dividend distribution tax and capital gains tax. To increase your SWP returns, choose funds that are tax-efficient.

Top 5 SWP Mutual Funds

When it comes to choosing the right SWP mutual funds, the options can seem endless. However, we have listed down the best SWP mutual funds plans that you can check out. 

S. No.Scheme Name1Y Returns
1.SBI Equity Hybrid Fund Growth (SBIMF)9.35%
2.ICICI Pru Equity & Debt Growth Plan (ICICIMF)20.07%
3.Quant Absolute Fund Direct-Growth (QuantMF)5.64%
4. HDFC Retirement Savings Fund Equity Plan (HDFC)24.40%
5. Tata Retirement Savings Progressive Fund Direct Plan-Growth (TATASP)13.52%

Benefits of a SWP Mutual Funds

There are several advantages to using a SWP Mutual Funds. Let’s examine the advantages of the top systematic withdrawal strategy below.

Tax Benefits

Capital Gains Tax: You are in charge of deciding when and how much you withdraw when you set up an SWP. It is possible to lower your overall tax liability by spreading out your withdrawals over several fiscal years and remaining in lower tax brackets.

Dividend Distribution Tax: If you choose a systematic withdrawal plan instead of receiving regular dividends, some mutual fund schemes, like equity-oriented funds, might not impose a Dividend Distribution Tax. Investors may save taxes as a result of this.

Dividend Distribution Tax (DDT): Selecting a systematic withdrawal plan over a regular dividend payout may exempt you from the Dividend Distribution Tax in some mutual fund schemes, namely equity-oriented funds. Investors may benefit tax-wise from this.

TypeShort-Term Capital Gains TaxLong-Term Capital Gains Tax
Equity Mutual Funds15%10% without any indexation
Balanced Mutual Funds15%10% without any indexation
Debt Mutual FundsDepends on the tax slab20% without any indexation

Rupee Cost Averaging

Regular Withdrawals: You can withdraw a set amount using SWP at predetermined times. This implies that you might sell more units during periods of strong market performance (high NAV) and fewer units during periods of weak market performance (low NAV).

MonthOpening NAVClosing NAVMonthly Return (%)

Reduced Market Timing Risk: Using a systematic withdrawal plan eliminates the need to time the market. With SWP, you can adhere to a controlled withdrawal plan rather than trying to sell at the ideal market high, potentially reducing the risk associated with market volatility.

Risk Mitigation: The value of your portfolio can be diminished during market downturns if you take a fixed amount of withdrawals each year. This reduces your exposure to the risk of selling a sizable portion of your investments.

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