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Systematic Withdrawal Plan (SWP)

An SWP allows an investor to withdraw a designated sum of money and units from the fund account at pre-defined regular intervals. It allows investors a certain level of independence from market instability and helps in avoiding market timing. The investor can reinvest the redeemed cash in another portfolio or use it as a source of regular income.



How does an SWP work?

An SWP allows you to withdraw a fixed sum of money every month or quarter depending on the option chosen and instructions given by you.

Let's say Ashish has 10,000 units in a mutual fund scheme on 1-Dec-11. He intends to withdraw 6,000 every month through SWP.

Date Opening Balance (Units) NAV Units Redeemed Closing Balance
1-Dec-11 10000 20 300 (6000/20) 9700
1-Jan-12 9700 18 333.33 (6000/18) 9366.67
1-Feb-12 9366.67 22 272.73 (6000/22) 9093.94

In this manner, units from mutual fund holdings will be redeemed in a systematic way to provide the investor with regular income.

Types of SWP

SWP is usually available in two options:

Fixed Withdrawal: In a fixed withdrawal option, the investor specifies the amount he wants to withdraw from his investment on a monthly/quarterly basis.

Appreciation Withdrawal: In an appreciation withdrawal option, the investor withdraws only the appreciated amount on a monthly/quarterly basis.

An SWP can help investors who require liquidity as it permits them to access their money precisely when they need it to meet their needs.


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