Earn Second Income With SWP

An important for future savings is planning for financial independence during retirement and earning additional income to have financial stability. SIPs invest a fixed amount at regular intervals to create wealth over the long term. SWP allows regular withdrawals from the capital investment to offer additional income.

To meet the different investor needs, asset management companies (AMCs) offer multiple investment options. Individuals may choose to invest a lump sum or start a systematic investment plan (SIP) to create long-term wealth.

Another option offered by AMCs is a systematic withdrawal plan (SWP). An individual can withdraw a fixed amount at periodic intervals from their mutual fund investments. Investors may also choose to withdraw the capital gains ensuring their principal remains intact and continues to grow based on the performance of the underlying assets.

Features of SWP

All types of investors can benefit from SWPs, which is a convenient and efficient way to meet their financial goals. Here is why:

🔸 Versatile

Individuals can choose the amount and frequency of withdrawals to meet their personal requirements

🔸 Capital preservation

Based on the withdrawal amount only a proportionate number of units are redeemed, which ensures capital preservation, especially in volatile and unpredictable markets

🔸 Choice of funds

Investors may start a SWP in different types of funds as per their risk appetite and financial goals, which include debt, equity, and hybrid funds

🔸 No lock-in

AMCs do not have a minimum lock-in period, which means investors may start the SWP whenever required

Benefits of SWP

🔹 Regular source of additional income
🔹 Systematically achieve financial goals
🔹 Risk management to average the divestment based on market conditions
🔹 Convenient and easy to set up

Who can choose SWP?

SWPs are flexible investment options and can benefit different types of investors, which include:

🔸 Retired people

Many retirees depend on the Income Distribution cum Capital Withdrawal (IDCW) to meet their regular expenses. However, dividend distribution is at the discretion of the fund managers depending on the accumulated returns or distributable surplus. The scheme may modify or discontinue the IDCW rate in volatile markets, which makes it unreliable. Retirees may opt for SWPs wherein they can choose the amount and frequency of the withdrawals, which ensures they have financial stability in their senior years.

🔸 Achieve financial goals

SWPs are highly versatile and allow investors to choose the amount and frequency of the withdrawals. This allows individuals to plan for their financial goals, such as a down payment for a house or car, paying children’s education fees, taking a dream holiday, marriage, and retirement.

🔸 Conservative investors

Investors who do not want to assume high risks of direct equity investments may also benefit from a SWP. Additionally, individuals may not have the experience and time to do in-depth research to find the most beneficial stocks. SWPs redeem a certain number of units to meet the withdrawal amount. The balance units continue to earn returns and benefit from capital appreciation. This ensures investors can ride through market volatility and minimize the potential losses resulting from market sentiments and investors’ emotions.

While starting a SWP, investors must choose an amount that does not deplete the capital investment. As a general rule, the withdrawal amount should not exceed the expected returns. An experienced wealth advisor will work out the most appropriate withdrawal amount that ensures capital preservation while meeting investor requirements.

SRH Wealth Management is a reputed and experienced advisor with expertise in designing the most beneficial SWPs. To know more, visit our website or get in touch with us here.