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I want to know more about Systematic Withdrawal Plan (SWP). I am 45 years and planning regular income after 60 years of age via MF investment. Please suggest how to go about it.


A Systematic Withdrawal Plan (SWP) is a facility that allows an investor to withdraw money from an existing mutual fund at predetermined intervals, for instance, monthly/quarterly/yearly. To generate this cash flow, SWP Plan redeems units of the mutual fund scheme at the chosen interval. SWP helps investors to create a regular flow of income from their investments. Existing investors looking for income at periodical intervals usually use SWP to fund expenses during retirement. The good part is that the returns are tax-efficient, and there is no TDS on gains, unlike traditional investment options. To use this facility (SWP) one should have sufficient corpus at the time of retirement. It would be advisable that you should build a good corpus through regular investment (SIP) in equity-oriented mutual funds. Once your retirement is approaching, you should shift your entire portfolio of equity to debt-oriented schemes. So, when you retire from your active service, you can use the SWP facility from debt-oriented schemes to fulfill all your daily expenditure needs. This way, on one side, your capital will remain protected, and on the other side, you can withdraw money at your convenience.

I want to invest Rs. 5000 each in five SIPs. Three for long term goals i.e. retirement planning and two for my child’s higher education. I’m 32 years old and I have a son who is two. Kindly suggest some suitable mutual fund scheme.

-Name withheld on request

Considering your young age and long-term investment horizon, it is advisable to create equity-oriented mutual funds portfolio. Historically, it has seen that the in long-term equity as an asset class has the potential to outperform other asset classes (Debt, Hybrid, Commodity, etc.). Within equity; Large & Mid Cap, Flexi Cap, Mid Cap and Small Cap categories can be considered. Rs. 5000 per SIP in funds namely; ICICI Pru Large & Mid Cap Fund, Parag Parikh Flexi Cap Fund, Kotak Emerging Equity Fund, PGIM India Mid Cap Opportunity Fund and Canara Robeco Small Cap Fund, can be invested. This way your portfolio will be diversified across category, geography and AMCs. It is also advisable to review your portfolio at least once in a year.

Queries answered by Sanjiv Bajaj, Joint chairman and MD, Bajaj Capital. 

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