Mutual Fund investments have gained huge traction in the recent years and are now a popular investment avenue for the masses. Mutual fund investments have registered a massive seven-fold growth in the last ten years or so, with Assets Under Management (AUM) rising sharply from Rs. 3.26 lakh crore as of March 2007 to Rs. 22.41 lakh crore as of January, 2018.

Not many people will be aware that, Mutual fund investments are not just about SIP (Systematic Investment Plan) or Lump sum investments, but also about regular income through Systematic Withdrawal Plan (SWP) – a unique facility provide by fund houses.

What is SWP?

Systematic Withdrawal Plan (SWP) is a facility through which mutual fund houses allow an investor to withdraw a pre-determined amount from his/ her existing investments in mutual funds at a pre-decided interval (the interval could be – weekly, monthly, quarterly, semi-annually or annually).

Functionally, SWP works in a similar way to SIP, but instead of investment it allows an investor to withdraw systematically. This facility helps in generating a regular cash flow for the investor, even while his/ her balance investment is positioned for possible capital appreciation.

Key Features of SWP

Disciplined withdrawal: Just like SIP is a disciplined approach to investments in mutual funds, SWP is a disciplined way of withdrawing funds from mutual fund investments.

Flexibility: An investor gets the opportunity to choose his/ her withdrawal frequency and date, it could be either weekly, monthly or at the start of the month, end of the month etc.

No cap on redemption: An investor can decide to use the SWP facility till his/ her investments are completely exhausted.

How to use SWP effectively

SWP facility is for investors looking at regular income from their investments. The income could be for specific short-term goals or varied requirements at the same time. In order to use SWP effectively one needs to set the SWP date closer to the required date of income, so that the amount thus withdrawn serves its purpose.

Benefits of SWP

Regular income: SWP can of steady source of income from investments. This is especially useful for those who need money when their cash flow comes to a halt like retirement, or at a time when supplemental income becomes a necessity due to the altered circumstances in life.

Rupee Cost Averaging: SWP can be more beneficial if it is designed for a longer period as it positions investors to take the advantage of rupee cost averaging. In a rising market, the investor may have to redeem lesser number of units to meet his/her SWP outgo.

Meet financial goals: SWPs can be linked to long term financial goals, such as providing a steady income in one’s retirement years or managing your child’s educational expenses.

Convenience factor: It’s a hassle-free way of getting income credited in your account, as the investor has to give just one-time standing instructions for SWP start & end date along with the frequency and amount.

Well talking about the convenience factor, SBI Mutual Fund has taken the SWP concept a level higher, it allows an investor to directly credit proceeds of redeemed units from investments to any of his/ her immediate family member through the facility – Bandhan SWP. For instance, by using Bandhan SWP a parent can set aside a corpus as investment in a growth plan of SBI mutual fund, and then start a SWP which credits a fixed amount in his/ her child’s account on a monthly basis to take care of the child monetary needs. This way your child’s confidence grows as he/ she is able to pursue his/ her dreams more freely. Now, that’s convenience!

Sponsored post by SBI Mutual Fund