What is Systematic Withdrawal Plan (SWP) in Mutual fund?

Systematic Withdrawal Plan (SWP) is a facility offered by mutual fund houses in India that allows investors to withdraw a fixed amount or a certain number of units from a mutual fund scheme on a regular basis, usually monthly or quarterly.

Under an SWP, an investor can withdraw a fixed amount or a certain number of units from their mutual fund investment, while the remaining investment continues to earn returns. This is particularly useful for investors who are looking for a regular stream of income from their mutual fund investment.

There are two types of SWP:

    Fixed SWP: In a fixed SWP, a fixed amount is withdrawn from the mutual fund investment on a regular basis. For example, an investor can choose to withdraw Rs. 5,000 from a mutual fund scheme on a monthly basis.

    Appreciation SWP: In an appreciation SWP, a fixed number of units are redeemed from the mutual fund investment based on the capital appreciation of the fund. For example, an investor can choose to redeem 10% of the units held in a mutual fund scheme if the value of the scheme has appreciated by a certain percentage.

SWP can be particularly useful for retirees or investors who are looking for a regular source of income. It can also be used to rebalance the portfolio or to meet other financial obligations.

It is important to note that mutual fund investments are subject to market risks, and past performance is not indicative of future results. Therefore, investors should consult with a financial advisor before making any investment decisions.