Investors have increasingly shown interest in investing through a Systematic Investment Plan (SIP). SIP allows people to invest a small monthly amount to generate long-term returns.
However, mutual funds offer a Systematic Withdrawal Plan (SWP) alongside SIP. Let’s understand SWP.
While SIP involves regular monthly investments, leading to a substantial amount over the years, SWP operates differently. Investors in SWP periodically withdraw from their investments.
Through SWP, individuals can invest in mutual funds and regularly withdraw a fixed amount of cash each month. This can be particularly useful for senior citizens as it provides a regular income stream.
In this scheme, you can choose the frequency of income disbursement, and the money will be deposited into your account accordingly. You also have the option to increase the disbursement amount if needed.
What about enjoying two benefits in one scheme? While SIP and SWP are typically separate investment plans, some companies offer both benefits through a single scheme.
ICICI Bank, for example, recently introduced a new policy called ‘Freedom SIP,’ which includes both SIP and SWP. Investors must select a specific period to invest in this scheme, ranging from 8 to 15 years. The savings should be gradually increased over time.
Maintaining disciplined savings can lead to unexpected profits in the long run. After the chosen tenure is completed, decisions on the frequency and amount of income disbursal should be made.
Moreover, fund managers can invest the surplus funds from the disbursements in other schemes, potentially doubling your benefits by returning the invested money and generating additional returns.