Systematic withdrawal plan: all you need to know
Systematic withdrawal plan
Investors can create a systematic withdrawal plan with the fund house to remove their mutual fund investments gradually over time. They must be aware of the following:
Form
The investor must complete a Systematic withdrawal plan form in order to join. The fund website has a download for this. Investors must utilise distinct forms for various strategies, plans, and alternatives.
Types of Systematic Withdrawal plan
There are two options: withdrawals for appreciation and set amounts. In the first, on the Systematic withdrawal plan date, a fixed amount is redeemed. In the other, periodic withdrawals from the fund are made to cover any plan appreciation as of the SWP date.
Dates and frequency
The investor must select a specific date within the month on which he wants the SWP transaction to occur. There needs to be a statement of SWP frequency. The paperwork must also include the start and end dates for the SWP.
Bank details
The default bank account listed with the fund house receives the proceeds from SWP. However, the same needs to be stated if the investor wants the proceeds to be credited to another account.
Process
At the official sites of acceptance of transactions, the form must be turned in. The SWP start date should be around a month from the day the form was submitted in order to provide time for the request to be processed, or as the fund house may specify.
Points to note
- If there are joint holders, each holder must sign the form.
- The list of plans that qualify for SWP is mentioned by the fund house. When investing, it’s a good idea to ask the fund if the facility is available.
- The investor can also set up SWP online if he invests in mutual funds through an internet platform.
FAQs
What is a systematic withdrawal plan?
An investor may withdraw funds from an existing mutual fund at predetermined intervals thanks to a tool called a systematic withdrawal plan (SWP). SWP assists investors in generating consistent income from their investments.
Is SWP better than FD?
A better investment choice than fixed deposits is the debt mutual fund’s provision for systematic withdrawals. It provides investors with a more lucrative and tax-efficient option by providing tax delay, diversification, and a reduced rate of taxes.
