What is Systematic Withdrawal Plan?

by susma November 09, 2017
SWP (Systematic Withdrawal Plan), WealthhunterIndia

What is systematic withdrawal plan?

SWP stands for a systematic withdrawal plan. In SWP, amount is deposited in a lump-sum. Choice of your scheme and the amount is withdrawn at a fixed interval.

SWP is just opposite to SIP. Where in SIP fixed amount is deposited at a fixed interval. One can say that SWP is a Cooler brother of SIP.

BUT why people need SWP? Well, let’s take an example suppose Mr. Fayada Singh is going to retire in, So MR. Singh decided to deposited Sum in Mutual Fund  with the option of SWP

So he decided to invest 20,00,000 with 25,000 in SBI Mutual Fund. For the sake of simplicity, we have ignored income tax and other hefty calculations. After his investment would look something like this

No of installment =24

Amount withdrawn=600,000

Current value=1,990,519

Units left=696.6408

Cumulative units= 55,467.0589

From the above example, it is evident that SWP Act as a Stable income source.

It can be added as an additional income source for income and the withdrawal amount can be further reinvested to diversify in many portfolios and to add up you investing Game.

Just take an above example but instead of Mr. Fayda Singh his nephew Mr. Profit Singh (we told you he will be back) had invested the same amount in the same fund. We will look return for the same time period and he is investing this fund in Franklin India smaller companies

Fund here would be.

Amount invested=600,000

Amount value=789,280

Total value=27,79,799

And within 2year he has earned more than 700,000 plus the initial investment is also secure. This is just in 2 years and one should not forget best friend of Mr. Profit Singh i.e compound interest

In all and all SWP is a great form of investment and it is for everyone who can invest Lump sum

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