In this article, we cover the essentials of a mutual fund systematic withdrawal plan (SWP) by answering some frequently asked questions.
1: What is a Systematic Withdrawal Plan?
The SWP is the opposite of a SIP. In a SIP, you invest a fixed amount each month (the most frequently used interval) and build up a lump sum. In an SWP, you invest a lump sum and withdraw a fixed amount each month (typically) to be used as a source of income.
The withdrawal is done in such a way that the product of units redeemed times the current NAV is equal to the fixed amount desired.
2: Why were SWPs created?
Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
Anything that the AMCs do is for their benefit primarily. With an SWP, the AMC (and their salesmen) earn a fee/commission on the lump sum invested and this income reduces gradually with each SWP instalment. Unlike a SIP where the fee/commission builds up gradually over time, the SWP provides instant profit and is more beneficial to the AMC considering the time value of money.
3: When should I use an SWP?
Just like a SIP, an SWP is entirely unnecessary (the same goes for the STP too!). If you want to invest in a mutual fund each month, do so manually on any day of the month convenient to you.
If you want to withdraw from a mutual fund, do so whenever you like! There are no extra benefits of a SIP or an STP. Not getting tied down to a SIP allows you to invest as much as possible each month and vary the investment amount at will depending on your needs.
Similarly, not using an SWP allows you to redeem what you want and when you want.
4: Which type of funds can be used for SWP?
The SWP amount for any month = Current NAV x no of units.
If the NAV on the date of redemption is low, then more units will be redeemed and the investment will deplete faster. If the downward trend continues the entire corpus will get exhausted much sooner than anticipated.
Therefore the simple thumb rule is, never set up an SWP from a fund in which the NAV is volatile (eg. equity funds, so-called balanced advantage funds, aggressive hybrid funds etc are to be avoided). These types of funds offer higher incentives to the sales guy!
We recommend using only funds like liquid funds, overnight funds, money market funds for regular withdrawals.
Those with a higher risk appetite (meaning more cash to burn) may consider ultra short term funds, arbitrage funds. Conservative hybrid funds or other long-term debt funds may be used by those with an even higher risk appetite.
5: What precautions are necessary before setting up an SWP?
The SWP is incorrectly recommended as a way to get a regular income after retirement from volatile mutual funds as mentioned above. Senior citizens with limited capital market experience in their youth and/or limited funds to work with should not be enticed with the advertised claims of “income with growth”.
Trying to maximise retirement income with less than an ideal corpus is an extremely difficult problem in finance and an SWP from a volatile mutual fund can result in irredeemable disaster.
Beware of SWP backtests with balanced advantage or any other mutual fund. The past performance does not reflect future performance disclaimer applies!
6: Can I use an SWP as part of a retirement bucket strategy?
Yes, but as mentioned above it will have to be from something like a liquid fund for either the main income (in case of no other pension source) or for handling discretionary expenses. See for example: I am 30 and wish to retire by 50 how should I plan my investments?
🔥Enjoy massive discounts on our courses and robo-advisory tool! 🔥
Use our Robo-advisory Excel Tool for a start-to-finish financial plan! ⇐ More than 1000 investors and advisors use this!
New Tool! => Track your mutual funds and stocks investments with this Google Sheet!
- Follow us on Google News.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Join our YouTube Community and explore more than 1000 videos!
- Have a question? Subscribe to our newsletter with this form.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!
Explore the site! Search among our 2000+ articles for information and insight!
About The Author

Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu gets a superpower!” is now available!


Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our Youtube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing

Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want

Your Ultimate Guide to Travel
