A Systematic Withdrawal Plan (SWP) is a facility offered by mutual funds that allows investors to receive a regular stream of income from their investments.
It is the opposite of a Systematic Investment Plan (SIP).
In an SWP, investors redeem a predetermined amount or a certain number of units from their mutual fund investment at regular intervals.
Here are key features and considerations related to Systematic Withdrawal Plans:
SWP provides investors with a systematic and regular cash flow, making it suitable for those who are looking to create a steady income stream from their investments.
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Investors can choose the frequency (monthly, quarterly, or annually) and the amount they wish to withdraw through the SWP. This flexibility allows them to tailor their income stream according to their financial needs.
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The tax implications of SWP depend on the type of mutual fund and the holding period.
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SWP can be set up for different types of mutual funds, including equity funds, debt funds, or balanced funds. The choice of the fund type depends on the investor's risk tolerance and income requirements.
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Mutual fund houses offer the option of setting up SWP with automatic withdrawals. This makes the process convenient for investors as the redemption and transfer of funds to their bank account happen automatically.
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