The stages in life are distinct – accumulation and de-accumulation – as are the investment decisions related to each stage. However, needs and wants are constant. It is traditional for the novice/intermediate investor to turn towards SIP (Systematic Investment Plan) for accumulating wealth and set aside legacy fund at the end of wealth creation journey given SIPs’ well known benefits.
Accumulated wealth is generally earmarked for big-ticket expenses or specific goals and can be depleted quickly without any source of income or appreciation during the de-accumulation phase of life. Not to mention, medical costs also burn a hole in wallets from time to time.
Investors have matured and so have solutions, but discipline still is “king”
Balancing larger expenses and allowing time for capital appreciation do not go hand in hand, notwithstanding regular expenses as well. Investors wary of interest rates, inflation, and socio-economic independence are inclined to reduce risk appetite to protect capital. They are unsure whether to revert to staggered investing or keep out of it and secure a corpus for expense and legacy funds or invest lump sum.
This is where a matured solution steps in. The approach is to look at plans that enable you to withdraw a regular sum from your investments at a predefined frequency as per your need. Disciplined withdrawal as per your suitability and requirement while not heeding market waves.
What can a Withdrawal Plan bring to the table?
Investors are sceptical of erosion of capital and constrained growth with respect to withdrawal plans. What they do not understand is that this solution is suited to support financial planning.
Below is an example of a withdrawal plan set up with Nifty 500 index fund. We can see how it helps set up withdrawal as per the investors expenses and conclude with legacy funds as capital appreciates despite market downturns such as pandemic.
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The Systematic Withdrawal Plan (SWP) Approach: Aim to safeguard your financial future
Discover an approach to securing your financial future through the Systematic Withdrawal Plan (SWP) – a dynamic strategy that offers sustainable wealth management pathways. Let’s delve into the core attributes that define the SWP advantage:
1. Steady Income for Financial Confidence
Experience the peace of mind that comes from receiving regular payouts from your invested funds.
2. Tailored Withdrawal Flexibility
Customise your financial strategy with ease. SWP empowers you to establish a withdrawal plan that suits your individual needs.
3. Tax-Efficient Wealth Growth
Leverage the advantages of tax efficiency inherent in SWP. Capitalise on potential tax benefits and optimise your wealth growth.
(Disclaimer: For individual nature of tax implications, investors are requested to consult their tax advisors before investing.)
4. Embrace Rational Investing
Bid farewell to the challenges of trying to time the market. SWP eliminates the need for making hasty investment decisions based on market volatility.
Elevate your financial strategy with the SWP approach, a sophisticated method that harmonises regular income, efficient wealth management, and intelligent investment decisions. Welcome a future of financial empowerment, where your aspirations take centre stage. Experience the transformative power of SWP and embark on a journey towards sustainable wealth management.
(Disclaimer: Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.)
Akhil Chaturvedi is Chief Business Officer, Motilal Oswal AMC.
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Updated: 24 Oct 2023, 10:59 AM IST