Systematic Withdrawal Plan
An arrangement to redeem a fixed amount from a mutual fund at regular intervals.
Formula
Units Redeemed each period = Withdrawal Amount / NAV on the withdrawal date
Unit
₹
In depth
An SWP is the tax-efficient way to draw regular cash from a fund, because each withdrawal is a redemption taxed only on its capital gain component, not on the whole amount as an IDCW payout would be. The unit count falls with each withdrawal, so the sustainable rate depends on the fund's return: withdrawing more than the fund earns depletes capital, slowly at first and then quickly. Sequence-of-returns risk is the specific danger — a poor market early in the withdrawal period does far more damage than the same market later, because more units are consumed at low prices. Setting the withdrawal rate conservatively is the main protection.
Worked example
Withdrawing ₹40,000 monthly from a ₹60,00,000 corpus is 8% a year. If the fund returns 9%, capital is broadly preserved; at 6% the corpus is consumed within roughly twenty years, and faster if the poor years come first.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Systematic Withdrawal Plan” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.