What is SWP?

Background

A Systematic Withdrawal Plan (SWP) lets you withdraw a fixed amount from a mutual fund at regular intervals, usually monthly. It is often used as a do-it-yourself pension in retirement.

Explanation

You invest a lump sum in a debt or conservative hybrid fund and set up an SWP of a fixed amount. Each payout consists of a mix of capital and gains, with capital gains taxed based on fund type and holding period. If your withdrawal rate is sensible and markets cooperate, the corpus can last many years.

Example

You invest ₹30 lakh in a conservative hybrid fund and start an SWP of ₹20,000 per month. Assuming moderate returns, this can provide income for many years while leaving some corpus to grow.

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