Money: What is a SWP? What are its benefits - top money-making tips explained; 3 schemes to invest in

Mutual funds are a great way for the common investor to make money. However, since lump sum amount cannot be invested in one go, there is the option of Systematic Investment Plan (SIP). However, for those who want to withdraw their money from a mutual fund scheme, there is the Systematic Withdrawal Plan (SWP) - this is a better alternative to maintain cash flow. You can withdraw a fixed amount through SWP.

What is SWP?
SWP is Systematic Withdrawal Plan
You can withdraw your money systematically.
SWP a better alternative to maintaining cashflow
You can withdraw a fixed amount through SWP

Systematic Plan for Regular Income

How does SWP work?
Get money monthly, quarterly, half-yearly and annually 
You can earn regular income through existing investments
Time and amount is pre-decided
Money is automatically credited in your accounts after a fixed time.
You can withdraw money at regular intervals.
The option of withdrawing money every month based on NAV
You can invest this money in mutual funds or even spend it
You get money on the sale of fund's units
SWP closes when the money in the fund is over

Systematic Plan for Regular Income

Benefits of SWP
An investor can choose the amount according to his needs
Investments in the markets give good returns
A good option to beat inflation
It can withstand the volatility of the market
You can put it in the salary-linked fund
You can use SWP for paying EMI
You can invest if you get a bonus or incentive

Systematic Plan for Regular Income

Important information regarding SWP
In which fund do you want to start SWP?
How much amount do you need for SWP?
For what duration do you want SWP?
Important to declare the date for SWP withdrawal

Systematic Plan for Regular Income

Difference between SIP और SWP?
SIP and SWP are opposite to each other
A fixed amount is deducted from your account in SIP
Money debited as SIP for mutual fund investment
Fixed amount credited in your account as SWP
It is deducted from the Mutual fund after sale of units

Systematic Plan for Regular Income

Tax on investments in SWP
In equity funds, STCG tax on investments less than 1-year duration.
15% STCG levied
After one year, 10% tax levied
In Debt funds, STCG for less than three-year period
30% STCG levied
Withdrawl after 3 years gives 20%+indexation benefit
Under the new tax proposal, LTCG is also taxed on income from investment

Systematic plan for regular income

SWP vs Dividend
SWP according to the will of investment
The dividend fund manager can decide this  
Not necessary that you get dividend at the fixed time
Some funds have the facility of regular funds
Some funds give dividends on rising market

Systematic Plan for Regular Income

What are the benefits after retirement?
Debt fund portfolio better after retirement
For monthly expenses, invest in an ultra short-term fund
You can get monthly amounts through SWP
SWP is good for senior citizens

Systematic plan for regular income

What to keep in mind?
Be careful while deciding the amount and time for SWP
Separate process for changing the existing date and time for SWP
You cant change time and the amount for SWP via phone or email
Transaction slip require to change instructions
Decide SWP as the cash requirements
No exit load on redeeming up to 10% of the purchased units
No exit load up to one year of allotment in Balanced fund, debt fund

Systematic plan for regular income

Sub- Equity fund for SWP?
Never run SWP with equity funds
Fund impacted on market falls
For a fixed amount, more units will be sold
This will quickly exhaust your units
For SWP, debt and liquid funds are better options

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Preferred funds of Poonam Rungta
--Edelweiss Balanced Advantage Fund
--DSP Bond and Equity Fund
--HDFC Balanced Advantage Fund