SWP is a facility offered by mutual funds to enable the investors to redeem the units in small portions at regular intervals so that short term goals or monthly income needs are met. The intervals period can range from monthly or quarterly. SWPs are preferred choice by retired individuals as it can help in creating regular flow of income from their investment corpus in mutual funds. Other investors can opt for this to pay EMIs, pay bills, & to take care of other expenses.
SWP can be effectively used to make better use of surplus funds as it allows you to invest that amount in mutual fund schemes & facilitates withdrawal as per your requirement. It also offers capital protection as returns on arbitrage funds are risk-free.
When one withdraws through SWP, the amount doesn’t attract any tax. All the money withdrawn will be capital itself.
This facility is a good choice for those who are looking for regular income over a period of time.
This method allows an investor to invest a fixed amount at regular intervals which ensures that the investor buys more shares of an investment when the prices are low & less when the prices are high.