If you are planning to take a sabbatical from work or are retiring soon, you may be looking at different investment options that give a regular income. Usually, a lump sum is invested to get regular fixed amounts later. Popular products include post office monthly income scheme, Senior Citizens’ Savings Scheme and monthly income plans (MIPs). A lesser known option is the systematic withdrawal plan (SWP) in mutual funds. Recently, some funds have even removed the exit load on SWPs if you were to withdraw up to 15-20% in the first year, to encourage people who want to start investing in this instrument. Here is a look at what an SWP is.
WHAT IS SWP?
Many of us would be familiar with a systematic investment plan (SIP), where a corpus is accumulated by making regular investments into a mutual fund. SWP, in essence, is the reverse of an SIP, where you regularly withdraw a fixed amount of money from a lump sum invested in a fund, i.e., you instruct the asset management company (AMC) to redeem units on a predetermined date and credit a fixed sum into your bank account.
