SWP [systematic withdrawal plan]

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Systematic Withdrawal Plan (SWP):
In today’s fast-paced financial world, it is very important to secure a steady income from your investments and maintain growth potential. Therefore, one strategy that has become popular among investors is Systematic Withdrawal Plan (SWP). In this blog, we will learn what SWP is, how it works, what are its benefits, and why it should be included in your investment strategy. And what do I say about it?

What is SWP? swp क्या है
Systematic Withdrawal Plan (SWP) is an investment strategy that allows you to withdraw a fixed amount from mutual fund investments at regular intervals. Whether you prefer monthly, quarterly, or yearly withdrawals, SWP gives you the flexibility to meet your financial needs without liquidating your entire investment. It is one of the most underrated passive income sources in our country.The power of SWP is 10x more than SIP if you invest wisely.

SWP is especially beneficial for retirees or people looking for a regular income stream. Or those people can also invest in it who are getting regular money and they are planning to retire early with this money for a few years or there is no need for it at all. In this you do not depend only on interest or dividends, rather SWP gives you the facility to withdraw funds while your principal amount remains invested, so that there is a chance of growth.

How does SWP work?

Initial Investment: First of all, you have to invest in a lump sum mutual fund scheme. This investment will be your principal amount from which you will withdraw funds.

Example

Setting up withdrawals: You can set a specific amount and frequency—monthly, quarterly, or annually. For example, if you invest ₹15 lakh and want to withdraw ₹15,000 monthly, your SWP would be structured like this.

Withdrawal process: When your specified dates arrive, the mutual fund redeems you some units equal to the amount withdrawn. This means you are selling a part of your investment to meet cash flow requirements.

Tax implications: Withdrawals made through SWP are subject to tax on capital gains. Long-term capital gains (investments held for more than a year) are taxed less, making SWP tax-efficient.

Benefits of SWP
Regular Income: The biggest advantage of SWP is getting regular income. This is especially beneficial for retirees who want consistent cash flow.

Flexibility: You can customize SWP as per your needs. You can also change your withdrawals, if you have Rs 20,000 then you can make it Rs 15,000 or even Rs 25,000 if there is a change in your financial situation.

Mitigation from Market Risk: By withdrawing a fixed amount, investors are not so much affected by market volatility. This way you avoid taking impulsive decisions.

Long-term Growth Potential: When you are withdrawing money, your remaining investment continues to grow. This is very important to preserve long-term wealth. This is the biggest advantage of investing in SWP. Suppose if a person invests Rs. 20,000 per month in a SIP for 20 years from today, then he can withdraw Rs. 2 lakh for the next 20 years from the same SIP.

Tax Efficiency: Since you are not selling your entire investment, SWP gives you a chance to minimize tax liabilities. Long-term capital gains tax is generally less than short-term.

When to use SWP?

Retirement Planning: For retirees, for education, for building a business for your upcoming new generations.

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