Home > Money > Question
Need Expert Advice?Our Gurus Can Help
Ramalingam

Ramalingam Kalirajan  |7002 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 18, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Asked by Anonymous - Jun 12, 2024Hindi
Money

Sir, I have a sum of 70 lacs which can be invested in Mutual funds. If I plan for SWP, How much amount, I may get yearly.

Ans: Hope this message finds you well. You have Rs 70 lakhs to invest in mutual funds and are considering a Systematic Withdrawal Plan (SWP). Let’s explore the details, benefits, and potential returns of an SWP.

Understanding Systematic Withdrawal Plans (SWP)
A Systematic Withdrawal Plan allows you to withdraw a fixed amount at regular intervals. This method helps in creating a steady income stream from your investments.

What is SWP?
Regular Income: SWP provides a regular income by redeeming units of your mutual fund investments periodically.
Flexibility: You can choose the frequency (monthly, quarterly, annually) and the amount to withdraw.
Capital Protection: Helps in managing withdrawals without significantly eroding the invested capital.
Benefits of SWP
SWP offers multiple advantages which make it an attractive option for investors seeking regular income.

Steady Cash Flow
Predictable Income: SWP ensures a steady and predictable cash flow, aiding in financial planning.
Monthly Expenses: Ideal for covering monthly expenses without liquidating large portions of your investment.
Tax Efficiency
Capital Gains Tax: Withdrawals are subject to capital gains tax, which can be more tax-efficient than regular income.
Long-Term Gains: If the investment has been held for over a year, it qualifies for long-term capital gains tax benefits.
Rupee Cost Averaging
Market Fluctuations: SWP helps in mitigating the impact of market volatility by averaging the cost of withdrawals.
Reduced Risk: By not redeeming all units at once, it reduces the risk associated with market timing.
Determining Potential Returns
The amount you can withdraw annually depends on the performance of the mutual fund and your withdrawal rate. Let’s discuss how to estimate this.

Assumptions for Calculation
Investment Amount: Rs 70 lakhs.
Expected Return: Assume a conservative annual return of 8%.
Withdrawal Rate: Typically, a safe withdrawal rate is around 6-8% per annum.
Calculation Example
Annual Withdrawal: With a withdrawal rate of 6%, you can withdraw Rs 4.2 lakhs per year.
Monthly Withdrawal: This translates to Rs 35,000 per month.
Growth Factor: The remaining investment continues to grow, providing potential for increased withdrawals in the future.
Selecting the Right Mutual Funds
Choosing the right mutual funds is crucial for the success of your SWP. Consider the following factors:

Diversification
Equity Funds: Provide growth potential but are subject to market volatility.
Debt Funds: Offer stability and regular income with lower risk.
Balanced Funds: Combine equity and debt to balance risk and return.
Fund Performance
Historical Returns: Analyze the historical performance of the funds to gauge potential future returns.
Fund Manager: Consider the expertise and track record of the fund manager.
Risk Tolerance
Risk Appetite: Choose funds that align with your risk tolerance and financial goals.
Market Conditions: Be aware of current market conditions and economic outlook.
Managing Your SWP
To maximize the benefits of an SWP, effective management of the withdrawal plan is essential.

Periodic Review
Annual Review: Regularly review your investment portfolio and withdrawal strategy to ensure alignment with your financial goals.
Adjust Withdrawals: Adjust the withdrawal amount based on the performance of the investments and changing financial needs.
Reinvestment Strategy
Reinvest Excess: If the fund performs well, consider reinvesting a portion of the returns to ensure long-term capital growth.
Maintain Balance: Ensure a balance between withdrawals and reinvestment to sustain the investment corpus.
Addressing Inflation
Inflation can erode the purchasing power of your withdrawals. Here’s how to mitigate its impact:

Inflation-Adjusted Withdrawals
Increase Withdrawals: Periodically increase the withdrawal amount to keep pace with inflation.
Diversify Investments: Include funds that historically outpace inflation, such as equity funds.
Long-Term Growth
Growth-Oriented Funds: Invest in growth-oriented mutual funds that have the potential to deliver higher returns over the long term.
Review Strategy: Regularly review and adjust your investment strategy to counteract the effects of inflation.
Potential Risks and Mitigation
While SWP is a beneficial strategy, it’s essential to be aware of potential risks and ways to mitigate them.

Market Volatility
Diversify Portfolio: Diversify your investments across different asset classes to reduce risk.
Regular Monitoring: Regularly monitor market conditions and adjust your portfolio accordingly.
Sequence of Returns Risk
Initial Losses: Early losses can significantly impact the sustainability of withdrawals.
Buffer Assets: Maintain a buffer of low-risk assets to draw from during market downturns.
Final Insights
Your decision to invest Rs 70 lakhs in mutual funds with an SWP is wise, offering both growth and regular income. By selecting the right funds and managing withdrawals effectively, you can ensure a steady income while preserving your capital. Regularly review your strategy, stay informed about market conditions, and make adjustments as needed to achieve your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |7002 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 22, 2024

Asked by Anonymous - Jul 17, 2024Hindi
Listen
Money
Which mutual fund is best for swp system, if I am investing 40 lac then how much swp per month I will receive
Ans: Investment Considerations
Investment Amount: Rs 40 lakhs
SWP Objective: Regular monthly income
Risk Appetite: Moderate
Investment Horizon: Long-term
Recommended Fund Types for SWP
Balanced Advantage Funds
Features: These funds balance equity and debt, offering growth with reduced volatility. Ideal for generating regular income through SWP.
Hybrid Debt-Oriented Funds
Features: These funds invest predominantly in debt with some exposure to equity. They offer stability and moderate returns, suitable for SWP.
Equity Savings Funds
Features: These funds use a mix of equity, debt, and arbitrage opportunities. They provide stability with a potential for better returns.
Expected Returns and Monthly SWP
Expected Annual Returns
Balanced Advantage Funds: 8-10%
Hybrid Debt-Oriented Funds: 7-9%
Equity Savings Funds: 8-10%
SWP Calculation
Assuming an 8% annual return, let's calculate the monthly SWP:

Initial Investment: Rs 40 lakhs
Annual Return: 8%
Monthly SWP: We aim for a sustainable withdrawal rate, typically around 5-6% of the corpus annually.
Monthly SWP Amount
Annual Withdrawal: Rs 40,00,000 * 5% = Rs 2,00,000
Monthly SWP: Rs 2,00,000 / 12 ≈ Rs 16,667
With a 6% annual withdrawal rate:

Annual Withdrawal: Rs 40,00,000 * 6% = Rs 2,40,000
Monthly SWP: Rs 2,40,000 / 12 ≈ Rs 20,000
Final Insights
Balanced Advantage Funds: Suitable for moderate risk appetite with growth and stability.

Hybrid Debt-Oriented Funds: Ideal for lower risk and stable income.

Equity Savings Funds: Good for balancing risk and returns with stable income potential.

Sustainable SWP: With Rs 40 lakhs, expect Rs 16,667 to Rs 20,000 monthly.

Regularly review the performance and adjust the SWP as needed to ensure it aligns with your financial goals and market conditions.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Nripen

Nripen Bhatt  |6 Answers  |Ask -

Start-Up Expert - Answered on Nov 10, 2024

Listen
Career
Sir, I have got your contact from RediffGurus. I approach you to guide me in my present situation. I have more than 30 years experience in export sales and also import procurement. Have been successful in developing new export markets and also importing quality material from abroad at competitive prices. All these activities have been under employment only, Where employers earned a lot, and brought me only wah wah, shabash, but no financial gains. Now I am retired, but still quite active mentally and physically. I have an idea which if backed with right financial background, can be a money spinner . The idea is to deal in metal import export trading. I can source international standard quality copper, aluminium, stainless steel etc., from China and other countries at 20 to 30% below market price. These can be sold to hungry Indian buyers here. I can assure, subject to investment, a profit of approx. Rs. 5 to 10 crore in first year itself. And of course a huge, unlimited market exists for these metals in vast Africa, where I have travelled many times and understand how business is conducted there . Now may I request you to tell me if it is possible to get a silent investor. For security purpose, I am ready to conduct entire business in investor's or his company's name, provided my interests are safe. Wahaj Nuri.
Ans: Dear Wahaj,

Your proposition is definitely sounding interesting, but as you have laid your idea and thoughts randomly here, it is not translating into a viable business. Have you prepared a comprehensive Business Plan? Have you worked on Business Frame work?
I would suggest to complete your offerings on papers, write/overwrite/correct/cut/revise and then bring a conclusive business proposition which none can refuse.
Regards

...Read more

Nripen

Nripen Bhatt  |6 Answers  |Ask -

Start-Up Expert - Answered on Nov 10, 2024

Asked by Anonymous - Nov 08, 2024Hindi
Listen
Career
Hi Nripen Sir, I am started my own market research(Secondary Research) firm bootstrapped without team and working on it. I want to know how to do customer or client acquisition. I have 10 years of market research experience. I am sole person to handle this. Also, I want to know do i need investment for this type of firms.
Ans: Let me congratulate you first, it is an excellent initiative you have taken, there are several firms in Market Research but there is always a demand for a genuine data driven research firm.
Initially you do not need a big team, you can handle solo, and when you require first go for management undergraduates as interns.
If you work smart client acquisition and retention will be really easy and smooth you can go step by step:
Create a one-page professional website, keep your clients’ segment in view and develop the content accordingly. Define methodology and tools in such a way that potential clients should relate immediately with their requirements. Don’t write lengthy content. Be precise be crisp.
Use business email id only.
Get very smart stationary printed, letterheads over 100 GSM, nice envelops, attractive business cards etc.
Search the websites where startups are registered such as startup India, start in up, istart etc., you will find a lot of startups who are in Launch phase or in Growth Phase, both look for secondary market research.
Exporters can be your potential clients.
Tourist planners.
Medical startups.
You have huge market for your service, start from here and you may ask time to time for further steps.
All the best

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x