Tailoring Investments to Individual Needs: The Uniqueness of Systematic Withdrawal Plans

Each person possesses distinct financial requirements, leading to the formulation of unique investment strategies.

- Kalpesh Dave

While certain investors opt for a one-time investment, others choose to distribute their investments gradually through a systematic investment plan (SIP). Investors vary in their financial goals, with some aiming for capital growth, while others prioritize a steady income stream from their investments. To cater to the diverse preferences of investors, fund houses offer various tools and facilities, one of which is the Systematic Withdrawal Plan (SWP).

WHAT IS A SWP? A Systematic Withdrawal Plan or SWP is a facility extended to investors allowing them to withdraw a fixed amount from a mutual fund scheme regularly. You can choose the amount and frequency of withdrawal. You can also choose to just withdraw the gains on your investment keeping your invested capital intact. At the set date, units from your portfolio are sold and the funds are transferred to your account.

Some of the important Features of SWP:

• It is a facility to redeem units regularly.

• You can choose the frequency of withdrawals.

• You can either withdraw a fixed amount or only the capital appreciation.

• It is ideal for investors seeking regular income from their  investments.

Benefits of SWP: Rupee Cost Averaging: Whether you purchase or redeem units in installments, you benefit from Rupee Cost Averaging. Since the markets are volatile, when you are redeeming all your units together, the timing of the sale needs to be when the markets are doing well. This ensures that you book good profits. If you end up selling during a slump, your profits can be impacted.