A Systematic Withdrawal Plan (SWP) is a facility that allows an investor to withdraw money from an existing mutual fund scheme at predetermined intervals (daily, weekly, monthly, quarterly or yearly). The money withdrawn from a systematic withdrawal plan can be reinvested in another fund or it can be used as a source of regular income especially during post retirement.

Systematic withdrawal plans are ideal for investors who want to create a regular flow of income from their investments. SWP also come in multiple variants like Fixed Periodic withdrawal & Appreciation withdrawal.

Let’s understand SWP with an example.

A unitholder has accumulated 10000 units of a Multi Cap Fund Cap till January 2020. He gives instructions for SWP of Rs 5000 at the end of every month.

Let’s say the NAV in February 2020 was Rs 50.

Therefore, number of units required to redeem Rs 5000 = 5000/50 = 100 units

Then, at the end of February, the unitholder will have 10000-100 = 9900 units

Let’s say the NAV in March 2020 was Rs 40.

Therefore, number of units required to redeem Rs 5000 = 5000/40 = 100 units

Then, at the end of March, the unitholder will have 9900-100 = 9800 units