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Ramalingam Kalirajan |10872 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 30, 2025

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

Question by kapil on Jul 21, 2025Hindi

What are the best swp plan

Ans: You are thinking in the right direction.

You are looking for a Systematic Withdrawal Plan (SWP) to generate income. This means you are valuing stable income and disciplined investing. That’s very good.

Let us now evaluate this from a 360-degree perspective.

You have not mentioned your exact requirement. So this answer is framed with a wide approach. You can always customise it later.

? What is SWP?

– SWP means you invest a lump sum in a mutual fund.
– Then you withdraw a fixed amount every month.
– It gives you monthly income like a pension.
– You continue earning returns on the remaining investment.
– Your capital remains invested unless it gets depleted.

? When is SWP suitable?

– You need a regular income from your investments.
– You have a lump sum and want monthly cashflow.
– You are retired or nearing retirement.
– You want to plan regular cash outflow without emotional decisions.

? What should your SWP be based on?

– Time horizon of your goal.
– Expected returns from fund.
– Your income need per month.
– Inflation impact on your needs.
– Taxation of the fund.

? What type of mutual funds are good for SWP?

– Do not use pure equity funds. They are volatile.
– Use hybrid funds or balanced advantage funds.
– You may use debt funds if your horizon is short.
– For long-term SWP (8 years+), equity-oriented hybrid is better.
– For short-term SWP (less than 5 years), conservative hybrid is safer.
– Balanced advantage funds are flexible. They adjust equity and debt.

? What asset mix is ideal for SWP?

– 15–20% equity for stability and growth.
– 80–85% debt for regular income and safety.
– Don’t go for 100% debt unless time horizon is below 3 years.
– Equity cushion helps beat inflation over time.
– Avoid small-cap or mid-cap for SWP.

? How much can I withdraw monthly?

– If you withdraw 5–6% per year, corpus can last longer.
– Withdraw 0.5% per month (or lower if possible).
– Do not exceed 7% yearly withdrawal.
– If market is down, reduce SWP for few months.
– This helps protect principal from erosion.

? Should I choose dividend plan instead of SWP?

– No. Dividends are not guaranteed.
– Mutual fund can skip or reduce dividend.
– SWP gives fixed and predictable payout.
– It gives more control than dividend option.
– Choose growth plan + SWP route.

? What about tax on SWP?

– SWP is not fully taxed like FD interest.
– You pay tax only on capital gains portion.
– If held for more than 1 year (equity), it is LTCG.
– LTCG above Rs 1.25 lakh is taxed at 12.5%.
– STCG is taxed at 20%.
– In debt funds, gains are taxed as per slab.
– Overall, SWP is more tax-efficient than FD.

? Should I use direct funds or regular?

– Direct funds look cheaper due to low expense.
– But you lose professional guidance and monitoring.
– In direct, wrong selection can eat your capital.
– It is always better to go with a Certified Financial Planner through an MFD.
– They help review, rebalance, and plan tax smartly.
– Regular plan expense is worth the peace of mind.
– You also get behavioural guidance during market falls.

? Why avoid index funds for SWP?

– Index funds are passive. They blindly follow market.
– They do not protect downside during market crash.
– Actively managed funds are better in SWP.
– They offer dynamic allocation, risk control, and better returns in volatile phase.
– In SWP, principal protection is critical.
– So avoid index funds in such plans.

? Should I choose SWP from an existing fund or new fund?

– Use existing fund only if its objective fits.
– Don’t do SWP from aggressive equity fund.
– If existing fund is large cap, mid cap or sectoral, avoid SWP.
– Start new SWP from hybrid or balanced advantage fund.
– That way, SWP becomes more structured and stable.

? Can I change SWP amount later?

– Yes. You can increase or reduce amount anytime.
– But frequent changes can affect discipline.
– Plan SWP for at least one year at a stretch.
– Review every year with your Certified Financial Planner.
– Adjust if income need or market changes.

? What if I need SWP and also want growth?

– Then reduce withdrawal to 4–5% per year.
– Rest of the money remains invested and grows.
– Choose hybrid fund with some equity.
– This gives both monthly cash and long-term growth.

? What are the risks in SWP?

– If you withdraw too much, capital will reduce.
– If market crashes, equity portion may lose value.
– Debt fund risk can come from credit or interest rate.
– Inflation may reduce your buying power.
– Wrong fund selection can damage plan.
– Therefore, don’t DIY. Take help of CFP-backed MFD.

? How to plan SWP for gold purchase?

– You said you need Rs 30 lakhs worth gold in 2 years.
– Do not do SWP for this short goal.
– Use low-duration debt funds or fixed deposits.
– You can do STP from liquid to short-term debt.
– Gold goal should be invested in low-risk asset.
– Withdraw lump sum after 2 years. Not via SWP.

? How to link SWP with your actual goals?

– You want Rs 2 crore in 10 years.
– You want Rs 30 lakh gold in 2 years.
– First, park Rs 30 lakh for gold in a debt fund.
– Start SIP for Rs 2 crore goal in hybrid equity fund.
– Use SWP from debt fund for monthly income.
– SIP continues for growth. SWP manages income.
– Separate funds for separate goals.

? Can I do SWP from PMS or stocks?

– No. SWP is not suitable from PMS or stocks.
– They are volatile and not structured for payout.
– Mutual funds have structured SWP option.
– Stick to hybrid mutual funds. It is safer and reliable.

? Should I take SWP from multiple funds?

– Yes. You can split across 2–3 funds.
– Choose different AMC or strategy.
– This gives diversification.
– But don’t overdo. Too many funds confuse.
– Two hybrid funds are enough.

? How often should I review SWP?

– Do annual review.
– Check if fund is performing well.
– See if your capital is intact.
– If fund underperforms, change with help of CFP.
– If income need goes up, adjust wisely.

? Should I do monthly, quarterly or annual SWP?

– Monthly is best. Matches monthly expenses.
– Gives better cashflow control.
– Quarterly or annual suitable if you don’t need frequent money.
– Monthly gives comfort like pension.
– Choose monthly unless your expenses are not regular.

? Final Insights

– You are financially stable and aware. That’s rare and admirable.
– SWP is a smart way to convert capital into income.
– Use hybrid or balanced advantage funds.
– Avoid equity-only, index or direct funds for SWP.
– Keep equity limited and debt dominant.
– Use regular plan with CFP-guided MFD only.
– Plan separate funds for gold goal and retirement goal.
– SWP gives freedom with structure.
– With proper plan, you can meet both your goals with peace.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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.