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  • Category: Mutual Funds

    Is systematic withdrawal plan a good option to redeem money from mutual funds?


    Have a query about SWP? Looking out for the details of how to use SWP for redeeming money from mutual funds? Here, on this page you can check out advice from experts and get answers to your query.

    I know that Systematic Withdrawal Plan (SWP) is a method, which works quite opposite to Systematic Investment Plan (SIP). In SWP, the money that we have already invested in mutual funds, will be withdrawn on regular basis so that we can use it for our regular expenses.
    Many experts suggest us to invest our money in mutual funds through SIP way in order to compensate the market vagaries. But the same experts also suggest to withdraw our money through systematic withdrawal plan. Everyone will try to maximise his profits. If we follow the SWP way of redemption, is there any guarantee that it won't redeem our money when the markets are low? So, whatever advantage we have gained through SIP, will be lost through SWP.
    Then what are the benefits of SWP? Is systematic withdrawal plan good option to redeem money from mutual funds?
  • #144696
    SIP is for those people who want to invest regularly for a long time and reap the benefits accordingly. The money is deposited at a predetermined fixed date every month.

    On the contrary SWP is for those who want some regular income from their lump sum investment at a predetermined date in a month.

    The purpose and objective of above two are entirely different and funds are designed accordingly.

    Thoughts exchanged is knowledge gained.

  • #144712
    SWP is for the people who want regular income from their SIP invested. And the type of people who usually go for it are those who have irregular investment patterns or who need regular money. So they invest through SIP into such funds which offer SWP. As you can guess depending on how the payout is set, it can automatically send the withdrawal to the client bank accounts after specific time period or threshold.

    Often funds are clubbed with two concepts. Like SIP is done first and the SWP plan is executed on the withdrawal. So depending on how the fund house chooses the fund then you get to subscribe accordingly. That seems to be the case with the most of the funds.

  • #144751
    The accumulation of units in a fund is done either through the SIP which the popular way of investing in MF in a regular monthly fashion on a stipulated date or through lump sum investment time to time.

    Whatever way the money is invested in a MF it may accumulate there and one can sell the units at the time of need. At the same time some funds have SWP facility through which the investor can get some specified amount every month on a regular basis. This option is used generally by those investors who require some money for their expenses on a regular basis.

    Knowledge is power.

  • #144753
    Many experts suggest us to invest our money in mutual funds through SIP way in order to compensate the market vagaries. But the same experts also suggest to withdraw our money through systematic withdrawal plan" The following may remove the confusion.
    Just as there is a facility of Recurring Deposit in banks, in Mutual Funds there is a way of SIP-Systematic Investment Plan- investing money in a regular sum and regular period and periodicity. This is suited for a person who has regular surplus income, but do not have a lumpsum surplus to invest. SIP usually gives the benefit of averaging the cost. That is, for each month on the date of SIP the price of stocks may vary and hence the number of units purchased may vary. However as there can be upside and downside in the overall period, the investor gets the averaged cost effect and so does not suffer high loss nor does he get high gain also.
    SWP or systematic Withdrawal Plan is almost the reverse. It is redeeming the investments in part by a regular amount and period. Here also the investor gets a sort of cushion from fluctuations of value as at a particular date, had the accumulated value withdrawn in one lot. It also serves as a steady income for the investor. The problem here unlike bank deposits is one cannot exact what will be real total residual value one may get after each SWP withdrawal .because the price fluctuates in market.
    However SIP as well as SWP both will also be subjected to the usual risk(and advantages) associated with investments in stock market .

  • #144922
    Although Systematic Investment Plan (SIP) is stated to be good to take care of market volatility in case of equity mutual funds, the same cannot be stated in respect of Systematic Withdrawal Plan (SWP). It does not protect us from market volatility in case of equity funds. It may cause issues relating to taxation in respect of debt mutual funds. So, lumpsum withdrawal is preferred instead of SWP.

    However, the investment experts opine that the systematic switch is much better than SWP.

    Caution: Explosive. Handle with care.


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