Investing in mutual funds through a systematic investment plan (SIP) has become increasingly popular among investors. According to the Association of Mutual Funds in India (AMF), more investors are opting for SIPs over lump sum investments. However, another avenue gaining traction is systematic withdrawal plans (SWP). In this guide, we’ll delve into how SWP works, its benefits, and explore the top 7 SWP mutual funds.
Understanding Systematic Withdrawal Plans (SWP)
While SIP involves investing a fixed amount at regular intervals, SWP entails withdrawing a fixed amount at predetermined intervals. Investors typically invest a lump sum amount in a mutual fund, and the fund house sells the investor’s net asset values (NAVs) to provide them with a monthly income.
If the withdrawal rate is lower than the fund’s growth rate, investors can receive monthly income for an extended period while their investment continues to grow. SWP also offers the advantage of rupee cost averaging, where the fund house sells fewer units when NAV rises and more units when NAV dips, potentially optimizing returns.
Moreover, SWP facilitates compound growth, contributing to faster investment growth over time.
Top 7 SWP Mutual Funds
Let’s explore seven SWP mutual funds that have consistently provided substantial monthly income over the last decade:
- Quant Absolute Fund – Growth Option – Regular Plan
- Annual Return (10 years): 17.52%
- AUM: Rs 2,024.53 crore
- Minimum Investment: Rs 5,000
- Expense Ratio: 2.05%
- ICICI Prudential Equity & Debt Fund
- Annual Return (10 years): 16.37%
- AUM: Rs 34,733.09 crore
- Minimum Investment: Rs 5,000
- Expense Ratio: 1.62%
- DSP Equity & Bond Fund – Regular Plan – Growth
- Annual Return (10 years): 15.83%
- AUM: Rs 9,044.39 crore
- Minimum Investment: Rs 100
- Expense Ratio: Not specified
- Canara Robeco Equity Hybrid Fund – Regular Plan – Growth Option
- Annual Return (10 years): 15.68%
- AUM: Rs 10,077.44 crore
- Minimum Investment: Rs 1,000
- Expense Ratio: 1.74%
- HDFC Hybrid Equity Fund
- Annual Return (10 years): 15.53%
- AUM: Rs 23,113.38 crore
- Minimum Investment: Rs 100
- Expense Ratio: 1.70%
- SBI Equity Hybrid Fund – Regular Plan – Growth
- Annual Return (10 years): 15.28%
- AUM: Rs 68,409.82 crore
- Minimum Investment: Rs 1,000
- Expense Ratio: 1.42%
- HSBC Aggressive Hybrid Fund
- Annual Return (10 years): 14.99%
- AUM: Rs 5,367.33 crore
- Minimum Investment: Rs 5,000
- Expense Ratio: 1.89%
These aggressive hybrid funds have consistently provided substantial returns, making them attractive options for SWP plan holders.
In conclusion, SWP offers a reliable income stream while allowing investors to benefit from the growth potential of their investments. By selecting the right mutual funds and staying invested for the long term, investors can effectively manage their financial goals through SWP.
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