Understanding SWP Mutual funds
Systematic Withdrawal Plan (SWP) is a method in mutual funds that allows you to withdraw a fixed amount from your investment on a regular basis. This is in contrast to SIP (Systematic Investment Plan), where you invest a fixed amount every month. SWP is suitable for people who want regular income, such as after retirement or for any other financial need.
In SWP, you can choose the amount and frequency (e.g., every month or every quarter) that you want to withdraw. The mutual fund company then sells units of the amount you have decided from your investment. This way, you get regular money, while the rest of the money remains invested in the mutual fund.
The main advantage of SWP is that it gives you regular income, and you can change the amount and timing as per your need. It can be a good option for post-retirement or any other important expenses. However, it is important to keep in mind the performance and tax of the mutual fund before opting for SWP.
Key Benefits of SWPs
Here you are told about the benefits associated with it.
- Regular Income: SWPs provide investors with a steady income stream, making them ideal for retirees or those who need predictable cash flow.
- Tax Efficiency: In India, long-term capital gains from mutual funds are taxed less if the investment is held for three years or more. This makes Systematic Withdrawal Plan (SWP) more tax-effective than other income sources.
- Flexibility : You can choose how much money you want to withdraw, giving you more control over your finances.
- Liquidity : Mutual funds are highly liquid, which means you can stop or change your SWP at any time, helping you keep your portfolio well-balanced.
Factors to Consider When Choosing the Best SWP Mutual Funds
Investors should consider the following while choosing the right SWP mutual fund.
- Fund Performance: A fund’s consistent and good performance over time is a good indicator of its ability to generate returns and provide a steady income through SWP.
- Fund Type: There are many types of mutual funds, such as equity, debt, hybrid and balanced funds. Debt and hybrid funds are preferred for SWP as their prices do not fluctuate much and they give more stable returns.
- expense ratio: The expense ratio is the fee the fund manager charges for managing your investment. A lower expense ratio generally means higher returns for investors.
- Risk Profile: Investors should adjust their risk appetite according to the type of mutual fund they choose. For stable and regular income, look for low-risk mutual funds
You should keep the above points in mind while investing in mutual funds.
Best SWP Mutual Funds for 2025
Now that we know the basics, let’s discuss how to make your portfolio strong in 2025.
- HDFC Hybrid Equity Fund
- Category: Hybrid (equity-oriented)
- Risk: Medium
- Expense Ratio: 1.59%
- 5-year annualized return: 14.5%
HDFC Hybrid Equity Fund is good for investors who want a balance between growth and income. This fund is a mix of equity and debt, which gives it moderate risk and consistently good returns. Hence, it is an excellent option for SWP as it balances both capital appreciation and income.
2. ICICI Prudential Balanced Advantage Fund
- Category: Hybrid (Dynamic Asset Allocation)
- Risk: Low to medium
- Expense ratio: 1.70%
- 5-year annualized return: 13.2%
ICICI Prudential Balanced Advantage Fund is a fund that changes its equity (shares) and debt (bonds) investments according to the market conditions. This means that when the market fluctuates, it changes its investments in a way that reduces risk.
This fund is good for those who want stable income with low risk, as it strikes a perfect balance of equity and debt. This fund has been performing well over the long term, and can also be a good option for SWP (Systematic Withdrawal Plan) to give you regular income.
By investing in this fund, you can get better returns with low risk.
3. Aditya Birla Sun Life Dynamic Bond Fund
- Category: Debt Fund
- Risk: Low to Moderate
- Expense Ratio: 0.87%
- 5-Year Annualized Return: 8.5%
If you are looking for stable returns and want to take less risk, then Aditya Birla Sun Life Dynamic Bond Fund can be a great option. This fund invests in government and corporate bonds, which gives you regular interest.
The special thing about this fund is that it can change its investment strategy according to changes in interest rates, which makes it more flexible.
If you are looking for a stable and predictable income, then this fund is very good for SWP (Systematic Withdrawal Plan), as debt funds are less risky and less volatile than equity funds.
Conclusion and Final thoughts
Choosing the right SWP mutual fund is important to ensure that you get regular cash flows while your investment grows. Before choosing a fund, think about how much risk you are willing to take, what you want to achieve and how long you plan to stay invested. Funds like ICICI Prudential Equity & Debt Fund and HDFC Hybrid Equity Fund are good for those who can take a little risk, while funds like Franklin India Low Duration Fund are safer and offer steady income.
SWP can help you manage your money, giving you regular cash flows while your investment grows. Just remember to keep an eye on how the market is moving, see how your fund is performing and make changes if needed.
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