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Which Mutual Fund is the Best for SWP?

Ramalingam

Ramalingam Kalirajan  |9213 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 20, 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
Dhermender Question by Dhermender on Aug 17, 2024Hindi
Money

Which fund best for swp plan

Ans: A Systematic Withdrawal Plan (SWP) allows you to withdraw a fixed amount from your mutual fund investments at regular intervals. It's a great option if you need a regular income, especially post-retirement. The key advantage of an SWP is that it provides a steady cash flow without completely redeeming your investments. The remaining invested amount continues to grow and can help you combat inflation over time.

Criteria for Selecting Funds for SWP
Choosing the right fund for SWP is crucial to ensuring a steady and reliable income. Here are some important criteria to consider:

1. Consistent Performance
Look for funds with a consistent track record of returns. The fund should have performed well across different market cycles, ensuring stability and reliability.

2. Low Volatility
Funds with lower volatility are preferable for SWP. High volatility can lead to fluctuating returns, which might impact your regular income.

3. Balanced Exposure
A mix of equity and debt exposure is often recommended. This balance helps in achieving a stable return while minimizing risks.

4. Post-Tax Returns
Consider the post-tax returns, especially if you fall into a higher tax bracket. Funds that offer tax efficiency should be preferred, as it will increase your effective income.

5. Regular Payouts
The fund should have a structure that supports regular payouts. This ensures that you get a fixed amount at your chosen interval without interruptions.

6. Historical SWP Performance
Evaluate the fund’s historical SWP performance. Check if it has been able to sustain payouts without eating into the principal over time.

Best Types of Funds for SWP
1. Balanced Advantage Funds
These funds adjust the allocation between equity and debt based on market conditions. This flexibility allows them to capture upside potential in rising markets while protecting the downside during market corrections. Their moderate risk profile makes them a good choice for SWP.

2. Equity Savings Funds
Equity savings funds invest in a mix of equity, debt, and arbitrage opportunities. They provide better risk-adjusted returns compared to pure equity funds, making them suitable for SWP. The diversified nature of these funds helps in maintaining a steady income.

3. Multi-Asset Funds
Multi-asset funds invest across various asset classes like equity, debt, and gold. This diversification reduces the overall risk and enhances the stability of returns. They are ideal for investors looking for a mix of growth and income through SWP.

4. Conservative Hybrid Funds
Conservative hybrid funds invest predominantly in debt, with a smaller allocation to equity. This makes them less volatile and suitable for investors with a low-risk appetite who still want some equity exposure for growth.

5. Debt-Oriented Hybrid Funds
These funds primarily invest in debt instruments, with a small portion in equity. They offer stability and relatively lower risk, making them ideal for conservative investors seeking regular income through SWP.

Disadvantages of Index Funds for SWP
While index funds are popular for their low cost, they might not be the best choice for SWP. Here’s why:

1. Lack of Flexibility
Index funds strictly follow the market index. They don’t have the flexibility to avoid underperforming sectors or capitalize on emerging opportunities. This could lead to inconsistent returns, which is not ideal for SWP.

2. Market-Linked Returns
Since index funds replicate market indices, their returns are directly linked to market performance. During market downturns, the returns can be lower, affecting your SWP payouts.

3. No Active Management
Index funds are passively managed, meaning they don’t have fund managers actively making investment decisions. This can limit the fund's ability to manage risks and enhance returns.

Disadvantages of Direct Funds for SWP
Investing in direct funds might seem cost-effective due to lower expense ratios, but there are drawbacks, especially when setting up an SWP:

1. Lack of Professional Guidance
Direct funds don’t come with professional guidance. A Certified Financial Planner can provide personalized advice, regular reviews, and adjustments to your SWP based on changing financial goals or market conditions.

2. Risk of Inappropriate Fund Selection
Without expert guidance, you might choose funds that don’t align well with your SWP needs. This could lead to a mismatch between your income requirements and the fund’s performance.

3. Missed Rebalancing Opportunities
Regular rebalancing is crucial for maintaining the desired asset allocation in your portfolio. Direct investors might miss these opportunities, leading to suboptimal performance and affecting SWP payouts.

Strategy for a Successful SWP
To maximize the benefits of an SWP, consider the following strategies:

1. Start with a Sufficient Corpus
Ensure that you have a sufficient corpus to support your withdrawal needs without depleting the principal too quickly. A well-planned withdrawal rate, typically between 5% to 8% annually, can help sustain the SWP for a longer duration.

2. Choose the Right Withdrawal Rate
Set a withdrawal rate that matches your income needs and investment corpus. A higher withdrawal rate might lead to faster depletion of funds, while a lower rate might not meet your income needs.

3. Reinvest Surplus Income
If you don’t need the entire SWP amount immediately, consider reinvesting the surplus in a debt fund or other safe investment. This can help maintain the value of your corpus and extend the duration of your SWP.

4. Regularly Review Your SWP
Market conditions and your financial situation can change over time. Regularly review your SWP and make adjustments as needed. This might involve changing the withdrawal rate, switching funds, or even modifying your investment strategy.

5. Seek Professional Advice
Work with a Certified Financial Planner who can help you design and maintain an effective SWP strategy. They can provide personalized advice, ensuring that your SWP aligns with your long-term financial goals.

Finally
Selecting the right fund for an SWP involves careful consideration of various factors, including fund performance, risk, and post-tax returns. Avoid index and direct funds for SWP due to their limitations. Instead, focus on actively managed funds that align with your income needs and risk tolerance. Regularly review your SWP strategy and seek advice from a Certified Financial Planner to ensure that your plan remains on track for the long term.

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.
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You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |9213 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 12, 2024

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I am 65 and retired, want to invest 50L in SWP scheme with monthly withdrawal of 50k after one year of investing. Pl suggest good fund ????????
Ans: It's wonderful that you're considering investing in a Systematic Withdrawal Plan (SWP) to generate a steady income stream during your retirement years. Given your investment horizon and income requirement, it's essential to choose a fund that balances growth potential with stability.

For your SWP scheme, you may want to consider investing in a balanced or hybrid fund. These funds typically allocate a portion of their assets to equities for growth potential and the remainder to debt instruments for stability.

Balanced funds aim to provide a blend of capital appreciation and income generation by investing in a mix of equities and debt securities. They can be suitable for retirees looking for a steady income stream while also seeking potential growth opportunities.

When selecting a balanced fund, look for one with a consistent track record of performance, low expenses, and a seasoned fund manager. Additionally, consider the fund's asset allocation, risk profile, and investment strategy to ensure it aligns with your financial goals and risk tolerance.

It's crucial to review your investment periodically and make adjustments as needed to ensure your portfolio remains aligned with your income requirements and financial goals.

Before making any investment decisions, I highly recommend consulting with a Certified Financial Planner who can assess your retirement needs and recommend a suitable SWP scheme tailored to your specific circumstances.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9213 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 23, 2025

Money
What is best mutual fund for swp. For 1 cr corpus.
Ans: Reviewing Your Income Needs
? You have amassed a corpus of Rs.?1 crore.
? Likely aim: withdraw around Rs.?60,000–80,000 monthly.
? Income must support lifestyle, health, and other expenses.
? Corpus longevity is essential—it must last many years.

Overview of Fund Types Suitable for SWP
Aggressive Hybrid Funds
? These blend equity and debt—typically 60–80% equity.
? They balance growth and safety, ideal for withdrawals.
? Offer smoother performance compared to pure equity.

Large-Cap or Flexi-Cap Equity Funds
? Provide long-term growth and inflation protection.
? Use equity withdrawals to support corpus growth.
? Maintain moderate exposure for stability.

Short-Term Debt / Liquid Funds
? Ensure cash flow without touching equity in downturns.
? Provide buffer to fuel SWP during volatile periods.
? Preserve capital while offering liquidity.

Gold Funds (Optional)
? Hedge against inflation and long-term volatility.
? Can complement corpus if desired.

Avoid pure small/mid-cap or thematic funds for SWP—they can be volatile and may harm regular income needs.

Why Live Actively Managed and Regular Plans Matter
Active funds allow managers to rotate out of risky assets in stress.

Index funds lack flexibility—they track market blindly.

SWPs need defense when markets drop; active funds help.

Direct plans lack periodic review and emotional guidance.

Regular plans via CFP-backed distributors offer discipline, advice, and tax aid.

Crafting a Sustainable SWP from Rs.?1 Crore
You’ll create monthly withdrawals that provide income without depleting principal:

Choose One Aggressive Hybrid Fund

Allocate around 60% of corpus (~Rs. 60 lakh).

SWP from this fund covers 60–70% of your desired monthly income.

Select One Equity Fund (Large/Flexi)

Allocate 20–30% of corpus (~Rs. 20–30 lakh).

SWP from this supports inflation and long-term growth.

Create a Short-Term Debt Buffer

Allocate 10–15% of corpus (~Rs. 10–15 lakh) to liquid or short-term debt.

Use this buffer to supplement income during equity market dips.

(Optional) Gold Exposure

Allocate 5% (~Rs. 5 lakh) to a gold fund.

Hedge against inflation and add a non-equity component.

Setting Up Monthly Withdrawals
Suppose your goal is Rs.?75,000 monthly (Rs.?9 lakh annually).

Withdraw around Rs.?50,000 per month from the hybrid fund.

Withdraw Rs.?20,000–25,000 from the equity fund.

Debt buffer steps in if markets fall short; hybrid and equity SWPs could be deferred or reduced.

How the Buffer Works When Markets Fall
If equity value dips, use buffer disbursement first.

Pause or reduce equity SWP to preserve principal.

Hybrid SWP may taper as well if buffer is available.

When markets recover, return SWP to normal rates.

This preserves your corpus and protects withdrawals.

Rebalancing & Portfolio Tracking
Assess allocation every six months.

If hybrid portion exceeds 70%, pause SWP via hybrid and redirect funds to debt or buffer.

If equity has dropped below 20%, stop equity SWP and invest hybrid returns into equity.

Rebalancing through SIPs avoids capital gains tax and simplifies execution.

Taxation of SWP Withdrawals
Equity and hybrid withdrawals taxed at LTCG 12.5% beyond Rs.?1.25 lakh annual gains.

Short-term gains taxed at 20%.

Debt fund income aligned with your tax slab.

Use SWP structure to manage taxable events gradually.

CFP guidance ensures you maximise LTCG exemptions annually and minimise overall tax.

Building Flexibility for Corpus Longevity
Keep your buffer fund uninvested and liquid—no SWP from it.

Hybrid equity SWP continues unless buffer is tapped.

Equity fund SWP can pause in low equity markets.

Ensure total SWP rate does not exceed safe withdrawal rate (4–6% initially).

Review and adjust annual based on inflation and corpus performance.

Why This Balanced SWP Works
Hybrid fund offers near-bank-like stability yet retains equity growth.

Equity fund ensures inflation resistance and long-term portfolio health.

Debt buffer protects principal and allows smooth income flow.

Gold allocation, if used, boosts defense against macro shocks.

Active funds and CFP oversight ensure strategic agility.

Implementing the SWP Structure
Step 1: Contact a CFP-backed MFD and set up regular plans for hybrid, equity, debt, and optional gold funds.
Step 2: Allocate corpus according to recommended percentages.
Step 3: Automate monthly SWP transactions: hybrid + equity withdrawal.
Step 4: Monitor buffer usage; top-up using redirections when markets recover.
Step 5: Revisit allocation strategy every 6 months; rebalance as necessary.
Step 6: Review tax impact annually and schedule SWP to use exemption thresholds.

Handling Market Downturns Without Selling Equity
Use debt buffer first to meet income needs.

Pause hybrid SWP if buffer is depleted.

Keep equity invested to recover from downturns.

Align SWP with recovery—reactivate hybrid and equity withdrawals when allocations rebalance.

Addressing Inflation Over the Long Run
Equity exposure should rise modestly over time to offset inflation.

Hybrid fund’s equity cushion also supports in rising cost environments.

Revisit SWP amount annually and adjust for living cost changes.

Keeping a portion in gold and equity helps retain purchasing power.

Safeguarding Through Swiss Cheese Protections
Ensure you hold a 6–12 month emergency fund outside SWP.

Maintain adequate health and term insurance.

Stay away from high-risk or illiquid investments.

Keep portfolio disciplined and consistent.

Avoid occasional mistakes—maintain regular structure.

Role of CFP?Backed Support in SWP Success
Advisors help you choose suitable hybrid, equity, and debt funds.

They assist with tax-efficient SWP scheduling and rebalancing.

They monitor risks, inflation, and portfolio drift.

They keep you emotionally grounded during market stress.

Tracking Progress for Peace of Mind
Use digital dashboards to track corpus performance monthly.

Receive biannual reports on asset allocation and debt buffer status.

Evaluate timeline and adjust desired SWP amount if needed.

Let the CFP help validate your strategy and adapt to life changes.

Considering Corpus Growth Over Time
Leave equity untouched for at least 5–7 years to allow compounding.

Hybrid reinvestments or buffer top-ups help preserve equity value.

Adjust equity SWP based on goals—perhaps increase after 5 years.

Corpus should generate steady income while retaining real value.

Handling One Ragged Edge: Ad-Hoc Inflows or Market Shocks
Bonus or inheritance can be deployed to buffer or equity buckets.

In a market crash, consider buying additional hybrid or equity portions.

If needs change—reduce SWP, augment buffer, or refresh allocation.

Always revisit goals and financial standing every year.

Final Insights
You have built a strong Rs. 1 crore corpus. This SWP design ensures steady withdrawals while preserving your wealth.
By blending hybrid equity growth, short-term buffer stability, equity inflation protection, and optional gold, you get a well-rounded solution.
Active funds and CFP support complete the picture—helping with tax, market shifts, and disciplined rebalancing.
This is the blueprint for sustainable income, financial independence, and peace of mind over coming decades.

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

..Read more

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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.

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