I want to know more about Systematic Withdrawal Plan (SWP). I am 45 years old and planning for regular income through MF investment after 60 years of age. Please suggest how to go about it.
-Specific
A Systematic Withdrawal Plan (SWP) is a facility that allows an investor to withdraw money from an existing mutual fund at predetermined intervals, for example, monthly/quarterly/annually. To generate this cash flow, the SWP scheme redeems the units of the mutual fund scheme at chosen intervals. SWP helps investors to create a regular flow of income from their investments. Existing investors looking for periodic income typically use SWP to meet expenses during retirement. The good thing is that the returns are tax-efficient, and unlike traditional investment options, there is no TDS on gains. There should be sufficient corpus at the time of retirement to use this facility (SWP). It would be advised 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 equities to debt-oriented schemes. Hence, when you retire from your active service, you can use the SWP facility from loan-oriented plans to meet all your daily expenditure requirements. This way on one hand your capital will be safe and on the other hand you can withdraw money as per your convenience.
I want to invest Rs. 5000 in each of the five SIPs. three for the long term target That means retirement planning and two for my child’s higher education. I am 32 years old and have a son who is two years old. Please suggest any suitable mutual fund scheme.
-Name withheld on request
Keeping your young age and long-term investment horizon in mind, it is advisable to build an equity-oriented mutual fund portfolio. Historically, it has been observed that long-term equities as an asset class have the potential to outperform other asset classes (debt, hybrid, commodity, etc.). within the equity; Large and mid cap, flexi cap, mid cap and small cap categories can be considered. Rupee. 5000 per SIP in the fund ie; One can invest in 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. This way your portfolio will be diversified across categories, geography and AMCs. It is also advisable to review your portfolio at least once a year.
Sanjeev Bajaj, Joint Chairman and MD, Bajaj Capital answered the questions.
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