As your mutual fund portfolio grows, you might reach a point where you wish to make partial withdrawals instead of withdrawing the entire amount. Maybe you want to generate a steady income stream while still letting the remaining investments grow. A systematic withdrawal plan (SWP) helps you to do just that.
Offered by most mutual fund houses, an SWP helps you withdraw from investments at regular intervals and receive the amount in your bank account. With this facility, you get a steady income stream, just like a salary or pension, while your remaining investment continues to benefit from the market’s growth.
The role of an SWP calculator in investment planning
For many, predicting the amount they will receive through SWP is difficult, as it depends on factors such as the investment amount, tenure, expected returns, and withdrawal frequency. An SWP calculator simplifies this calculation and helps investors find out the withdrawal amount they will receive from their mutual funds investments.
With a clear idea of the expected withdrawal amount, it becomes easy to align your SWP strategy with your financial goals and monthly expenses. In fact, you can also adjust the parameters in the calculator to experiment with different scenarios and find the most suitable withdrawal plan to meet your needs. Thus, this estimation is valuable for investors to plan their finances more strategically.
Steps to use the SWP calculator
Using an SWP calculator is easy as most of them have user-friendly features and an intuitive interface. Just follow these simple steps:
- Enter the total value of your investments.
- Input the amount you want to withdraw from the mutual fund scheme and at what intervals. This is the regular fixed amount you want to receive as income through the SWP. Remember that this amount can be adjusted based on your financial requirements and goals.
- Provide the expected return rate, which represents your investments’ anticipated annual growth.
- Enter the duration for which you intend to continue the SWP.
- After entering all the necessary information, click on “Calculate”.
The outcome
Within seconds, the SWP calculator will process the data and display three essential outcomes:
- The total amount you have invested.
- Total withdrawal amount you can expect over the specified period.
- The final value of your investment in mutual funds after the specified period, considering all withdrawals.
If the results of the calculated SWP do not align with your expectations, you can adjust the inputs. Keep modifying the withdrawal amount, investment value, expected return rate, or duration until you find an SWP that better suits your needs.
Plan your SWP efficiently
While SWP calculators are valuable tools, several additional factors should be considered before making withdrawal decisions-
- Keep an eye on market trends and adjust your SWP strategy accordingly to earn regular income while maximising returns on the remaining holdings.
- Account for inflation while setting withdrawal amounts so that your income maintains its purchasing power over time throughout the years.
- Monitor the performance of your mutual funds and reassess the SWP amount if necessary.
- Make sure you have an emergency fund to meet unexpected expenses, so your SWP remains undisturbed for long-term goals.
- If you find it challenging to make decisions or feel uncertain about your SWP strategy, consider consulting a financial advisor. Their expertise and valuable insights can help you strategise your SWP better.
Ending note
Investing is not just about putting money into various stocks, bonds, and mutual funds. Investment planning is incomplete without a proper withdrawal plan, and an SWP calculator helps investors systematically withdraw their investments without disrupting the balance. This tool gives investors more control over their funds, facilitates informed decision-making, and ensures a stress-free withdrawal process, helping them manage their expenses and budgets effectively.
