Systematic Withdrawal Plan (SWP): SWP is just opposite to systematic investment plan (SIP), where instead of depositing money every month, one withdraws money each month. Mutual fund investors use SWP to get a monthly pension. But before we get into more details about SWP, consider two situations: you invest a lump sum amount in a mutual fund. The money grows by 12 per cent annually for two years, and in the third year, your investment slumps by 40 per cent in an economic downturn. And it is the same year when you need money from your mutual fund investments. You will have no option but to suffer a loss.
In the second situation, you have a large amount that you invest in a mutual fund as a lump sum.
But your problem is that instead of withdrawing money after years of compounding, you want to withdraw it every month to meet your expenses.
In both situations, the SWP method can be a win-win situation for you.
At one end, systematic withdrawal of money helps negate market fluctuations as you withdraw money in small quantities every month.
On the other hand, a monthly withdrawal ensures you get some return every month from your mutual fund investments.
How does SWP work?
You invest a lump sum amount in a mutual fund, which means you purchase net asset value (NAV) units.
You fix the monthly withdrawal amount from this investment.
Every month, the fund house sells NAVs with the same value.
If the market is high and the NAV is costly, the fund house sells fewer units; when the market is low and the NAV rate is also low, the fund house sells more NAVs.
If your rate of withdrawal is lower than the rate of growth, you can get the monthly pension for decades, and there are chances that even after that withdrawal, the value of your investment is many times higher than the principal amount you had invested at the time of setting the SWP option.
In this write-up, know about the top 7 SWP plans in the last decade, and the balance amount in each fund after withdrawing Rs 70,000 in monthly pension from each fund.
All selected funds are hybrid aggressive funds as they have been the top-performing SWPs in the last decade.
DSP Equity & Bond Fund- Regular Plan – Growth
The fund’s Compounded Annual Growth Rate (CAGR) in the last decade has been 14.02 per cent.
The fund’s NAV is worth Rs 323.212, while is asset under management (AUM) is Rs 9,131.81 crore.
Benchmarked against CRISIL Hybrid 35+65 Aggressive TRI, the fund has given a 14.86 per cent CAGR since its inception in May 1999.
On a Rs 50 lakh investment, after getting monthly withdrawals of Rs 70,000 for 10 years (120 months), or a total of Rs 84 lakh, an investor still has Rs 11,74,708 in the fund.
ICICI-Prudential-Equity-Debt-Fund-Growth
The fund’s CAGR in the last decade has been 13.99 per cent.
The fund’s NAV is worth Rs 354.0, while it has an AUM of Rs 35,122.02 crore.
Benchmarked against CRISIL Hybrid 35+65 Aggressive TRI, the fund has had a CAGR of 15.57 per cent since its inception in November 1999.
On a Rs 50 lakh investment, after withdrawing Rs 70,000 monthly for 10 years, one still has Rs 11,58,917 in balance.
SBI Equity Hybrid Fund – Regular Plan -Growth
fund has had a CAGR of 13.84 per cent in the last one decade.
It has a NAV of Rs 269.2047, while its AUM is Rs 68,372.47 crore.
Benchmarked against CRISIL Hybrid 35+65 Aggressive TRI, the fund has given a CAGR of 14.21 per cent since its inception in December 1995.
On a Rs 50 lakh investment, after withdrawing Rs 70,000 monthly for 10 years, one still has Rs 10,54,521 as a balance.
Quant Absolute Fund Growth Option – Regular Plan
The fund’s CAGR in the last decade has been 13.79 per cent.
Its NAV rate is Rs 429.0366, and its AUM is Rs 2,114.19 crore.
Benchmarked against the CRISIL Hybrid 35+65 Aggressive Index, the fund has given a 17.54 per cent CAGR since its inception in March 2001.
On a Rs 50 lakh investment, after withdrawing Rs 70,000 monthly for 10 years, one still has Rs 10,20,958 in balance.
Canara Robeco Equity Hybrid Fund Regular Plan Growth Option
The fund has had a CAGR of 13.35 per cent in the last decade.
The fund’s NAV is Rs 334.49, while its AUM is Rs 10,152.64 crore.
Benchmarked against CRISIL Hybrid 35+65 Aggressive TRI, the fund has had a CAGR of 13.14 per cent since its inception in February 1993.
On a Rs 50 lakh investment, after withdrawing Rs 70,000 monthly for 10 years, one still has Rs 7,27,179 as a balance.
Franklin India Equity Hybrid Fund Growth Plan
The fund’s CAGR in the last decade has been 13.04 per cent.
The fund’s NAV is Rs 253.1099, while its AUM is Rs 1,806.96 crore.
Benchmarked against CRISIL Hybrid 35+65 Aggressive TRI, the fund has had a CAGR of 14.07 per cent since its inception in December 1999.
On a Rs 50 lakh investment, after withdrawing Rs 70,000 monthly for 10 years, one still has Rs 5,29,365 as a balance.
HDFC Hybrid Equity Fund – Growth Plan
The fund has had a CAGR of 12.80 per cent in the last decade.
The fund’s NAV is worth Rs 111.506, while its AUM is Rs 23,138.21 crore.
Benchmarked against NIFTY 50 Hybrid Composite Debt 65:35, the fund has had a CAGR of 15.68 per cent since its inception in April 2005.
On a Rs 50 lakh investment, after withdrawing Rs 70,000 monthly for 10 years, one still has Rs 3,75,492 as balance.
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