Fixed Amount SWP
In this type, investors withdraw a predefined fixed sum at regular intervals. The proceeds keep on being withdrawn up to depletion of corpus or on termination of the plan by the investor.
Example: ₹10,000 SWP every month for a debt fund investment.

Understand SWP in Debt Mutual Funds

SWP allows investors to withdraw a fixed or variable amount from their mutual fund investment at regular intervals. Instead of redeeming the entire investment at once, SWP enables partial redemptions while keeping the rest of the investment active and growing.
This approach is apt for debt mutual funds as the primary goal of investment in them is stability and income generation. The withdrawal can be structured as per the needs of an investor, such as a monthly requirement or periodic lump sum.

A systematic withdrawal plan or SWP in debt mutual funds is a very structured way of earning regular income without withdrawing the rest of the corpus. Thus, it has become a very popular choice for retirement and others who have periodic needs for funds. Debt funds are focused on fixed-income securities and offer stability along with potential moderate growth. It is thus the ideal vehicle for SWP.
SWP offers greater flexibility, tax efficiency (capital gains tax), and inflation-adjusted returns compared to Fixed Deposits (FDs). However, it involves some market-linked risks and unsustainable withdrawal rates that can deplete the corpus over time. Choosing the right fund with low risk and stable performance is critical. SWP offers options such as fixed or appreciation-based withdrawals, catering to diverse investor needs.
The main reason is this plan is good for long-term goals, and if income generation is the goal, it serves perfectly. Balance withdrawals and returns for sustainability. It's certainly not for all, but for those who desire flexible, tax-effective income that can grow along with capital, SWP in debt funds will offer superior, or at least a far better alternative than FDs.

This is the investor who intends to withdraw a certain amount on a monthly basis, say for ₹10,000 or ₹25,000, etc. The required mutual fund units will thus be liquefied to provide the payout.
For instance, if a corpus of the investor's mutual fund is ₹10,00,000 and an investor is withdrawing ₹20,000 every month that means units of the fund are being liquidated each month. The amount drawn would remain the same does not change with the fund's performance, though corpus will continue to go down till it performs well to be at par with the amount of withdrawal.

An SWP, or Systematic Withdrawal Plan, is an investment plan from which individuals- more often retirees-withdraw money systematically from an investment- a mutual fund or any other long-term saving scheme. An investor can convert his or her investment into regular cash flows, which is still accompanied by growth in the portfolio. An SWP is an investment idea that generates a regular income stream and therefore is quite an effective strategy for retirement savings or other long-term investments.
An SWP is normally compared to a SIP, where a person puts money regularly to enhance his corpus over time. However, an SWP is the reverse where it helps one create liquidity and regular payments without the compulsion of liquefying the entire corpus in one go.
In this article, we will look at the overview of SWP, its key features, calculations, taxation, benefits, and pitfalls.