A facility to withdraw a fixed amount from your mutual fund at regular intervals, providing a steady income stream.
A Systematic Withdrawal Plan (SWP) is the reverse of SIP. Instead of investing a fixed amount every month, you withdraw a fixed amount from your existing mutual fund investment each month (or quarter). It is widely used to generate regular income from a corpus, especially in retirement.
You have ₹50 lakh in a balanced advantage fund after retirement. You set up a SWP of ₹25,000/month. Each month, the required number of units is redeemed at the current NAV to pay you ₹25,000. Your remaining units continue to grow in the fund.
You specify the withdrawal amount and frequency (monthly/quarterly/annual).
On the withdrawal date, units worth the specified amount are redeemed at the prevailing NAV.
The number of units redeemed varies — higher NAV means fewer units redeemed for the same withdrawal.
The remaining corpus continues to earn returns; the SWP can sustain itself if fund returns exceed the withdrawal rate.
Corpus: ₹50,00,000 in a balanced advantage fund Monthly SWP: ₹25,000 (₹3,00,000/year) Assumed net annual return: 9% Year-end: Portfolio earns ~₹4,50,000 | Withdrawals ₹3,00,000 | Corpus grows to ~₹51,50,000 At a 6% annual withdrawal rate (₹3L on ₹50L), the corpus grows rather than depletes. A sustainable SWP rate is generally 5–6% annually for balanced funds, assuming 8–10% returns.