Best SWP Mutual Funds to Invest in 2022.
A Systematic Withdrawal Plan (SWP) lets investors withdraw money from their investments at regular intervals. It is similar to a systematic investment plan (SIP), which enables them to invest a certain amount at regular intervals.
The investor has full control over the SWP and can choose its size, schedule of payments, and length of time. Withdrawals from SWP may be charged an exit load. This makes SWP plans an excellent bargain for investors who require instant access to their funds.
Investors use an SWP when they want to get a steady flow of money from their investments. SWP has multiple use cases, like retirement, EMI payments, meeting regular expenses, etc. But how can you choose the best SWP that suits your needs? Let’s find out.
Important Factors Before Choosing the Best SWP Plan
There are certain things that you should remember before selecting the best SWP in a mutual fund. Verifying the mutual fund implies that the company’s stability and longevity are your first steps.
Secondly, you should consider the asset allocation approach and the fund’s risk-adjusted returns.
Thirdly, you need to see whether investing in SWP via a mutual fund would incur any fees or not.
Here are some other factors you need to consider before selecting an SWP plan:
Financial Requirements
When deciding how much to invest, it’s important to consider your future financial needs. This will involve determining the goals of your investment. It can be retirement, purchasing a house or car, etc.
Consistent Earnings
You need to determine your needs before going for SWP. If you do not need constant access to funds, you may opt for a lump sum withdrawal. Monthly salary withholding provisions are a common type of SWP plan. The monthly payment can be set based on your requirements.
Retirement Income
SWP can become the basis for your retirement income. You can list your preferred mutual funds to start a simple plan for withdrawing money over time. SWP plan, if set up correctly, is an excellent way to provide steady income during your retirement years. Few people may feel more secure if they are guaranteed a monthly income. In this case, a systematic withdrawal plan is helpful.
Impact on Taxes
If you use the best SWP in mutual funds to supplement your monthly income, you should pay special attention to the tax implications. The distribution through SWP will be subject to capital gains tax.
You should know that the fund you invest in charges a capital gains tax. For instance, long-term capital gains on stocks (gains accrued over more than 12 months) shall be taxed at 10%. Whereas short-term capital gains (gains accrued over less than 12 months) shall be taxed at 15%.
Market Conditions
Before you invest in an SWP plan mutual fund strategy, it’s important to think about how the stock market is performing. This is because mutual funds are market-linked plans. If the market is performing well or is expected to rise, then it is the right time to invest in SWP. In the long run, markets have always risen. If you are investing with a long-term horizon, then you don’t need to panic much.
Best SWP in Mutual Fund in India
Here is a list of some of the best SWP in mutual funds in India:
SBI Equity Hybrid Growth Plan
SBI Equity Hybrid Growth Plan is a high-risk option from SBI Mutual Fund. Since its inception on December 31, 1995, investors have been able to place their money into either debt or stocks via this fund.
This investment’s minimal risk makes it suitable for people who want their money to grow over time. The plan’s goal is to provide investors with liquidity and long-term capital growth.
The plan invests in a variety of asset classes. This includes a variety of stocks and bonds from fast-growing companies and safe haven investments like government bonds. A diversified investment portfolio reduces your portfolio’s risk.
ICICI Pru’s Equity and Debt Fund
The ICICI Pru Equity and Debt Growth Plan is an ideal hybrid fund strategy from ICICI Prudential Mutual Fund. Allocating funds across equities, money market instruments, and some fixed income is part of the plan’s investment strategy. It aims to deliver a passive income source and long-lasting capital appreciation.
Quant Absolute Funds – Growth
The Quant Absolute Fund Direct-Growth invests in both equity instruments and fixed-income securities. This allows investors to generate passive income along with the growth of their investments.
Franklin India Equity Hybrid Growth Plan
This plan gives investors access to equities, the most alluring asset class for long-term investment. Investments in a diversified, high-quality portfolio aim to produce a consistent income stream and long-term capital growth.
Canara Robeco Equity Hybrid, A Long-Term Growth Investment Program
With an eye on high annual returns and long-term growth, the Canara Robeco Equity Hybrid Growth Plan uses a balanced portfolio with a hybrid fund structure. The plan’s ultimate objective is to curate a well-diversified investment portfolio that generates high annual returns and substantial capital appreciation. In March 2000, the initiative became a permanent part of the system.
The Bottom Line
SWP in mutual funds provides a wide range of opportunities that make investing accessible to everyone. SWP plans allow you to withdraw systematically from your investment. Thus, you benefit from a regular income while you stay invested.
Once you are clear on your goals, selecting the best systematic withdrawal plan becomes easier. To learn more about SWPs and other investment options, you can read similar blogs on the Piramal Finance website.