What is Systematic Withdrawal Plan?


Mutual Funds Sahi Hai?

Some people invest in Mutual Funds for a regular income, and they usually look at options of getting a dividend. Thus many schemes, especially debt oriented schemes, have monthly or quarterly dividend options. It is important to note that dividends are distributed from the profits or gains made by the scheme and are in no way guaranteed every month. Though the fund house endeavors to give consistent dividends, the distributable surplus is determined by market movements and fund performance.

There is another method to get a monthly income: using the Systematic Withdrawal Plan (SWP). Here, you need to invest in the growth plan of a scheme and specify a certain fixed amount required as a monthly payout. Then on a designated date, units amounting to that fixed amount would be redeemed. For example, an investor could invest Rs. 10 lacs and request that Rs. 10,000 be paid on the 1st of every month. Then, units worth Rs. 10,000 would be redeemed on the 1st of every month.

It is important to note that the tax treatment for both, dividend and SWPs, vary, and investors need to plan accordingly.

*Monthly Income is not assured and should not be construed as guarantee of future returns.

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