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IDCW vs Growth Option for Mutual Funds

Explore the best funds for systematic withdrawal plans to ensure steady income

Explore 1,000+ mutual funds. Start with just Rs. 100

Article 4

Systematic Withdrawal Plan (SWP) is commonly used by investors when they want to scale down their mutual fund investments and earn a steady amount. This is especially a great solution for retirees, or those who wish to have consistent income without damaging their capital. The selection of funds for an SWP is very important, as it determines the withdrawal longevity and wealth accumulation feature when it comes to investment. This article will outline the most suitable funds for a systematic withdrawal plan and which factors should be kept in mind before selecting them.

What to consider when choosing funds for a SWP?

1. Fund type:

Equity, hybrid, and debt each have a different risk-return profile. Hybrid and debt funds are typically preferred by investors for systematic withdrawal plans since these funds are less volatile and give more predictable returns when compared to equity funds.


2. Historical performance:

Select funds that have a proven record of performance, even in a recession period. This ensures that the investment can survive withdrawals in even adverse times.


3. Expense ratio:

The lower the expense ratio, the better the return, especially in a long-term investment. Choose funds which have manageable expense ratios to ensure that net returns earned are maximised.


4. Withdrawal rate:

This should not be greater than the fund's average annual return. A prudent rate ensures that the principal will not be eroded too quickly.

Key takeaways

  • SWPs provide a steady cash flow without depleting the investment capital.
  • Hybrid and debt funds are generally more suitable for SWPs due to their stability.
  • Choose funds with a consistent performance record, low expense ratios, and an appropriate withdrawal rate.
  • Diversified funds like balanced advantage and equity saver funds offer a good mix of growth and stability.

Build your wealth with SIP

5 Best Funds for SWP in 2025

1. HDFC Hybrid Equity Fund:

This is a hybrid fund which allows you to have a blend of growth & stability. With the right balance of stability and performance, it can be an ideal choice for systematic withdrawal plans.


2. ICICI Prudential Balanced Advantage Fund:

An asset allocation fund having an equity foray which dynamically changes its exposure between equity and debt depending upon the market scenario. This kind of flexibility makes risk management easier and keeps delivering consistent returns.


3. SBI Magnum Medium Duration Fund:

This is a debt fund with a moderate-duration profile offering stable returns coupled with low to moderate risk. It is most suitable for someone who wishes to use a cautious approach with their systematic withdrawal plan.

Popular mutual fund categories to invest in India

NFO Mutual Funds

Debt Mutual Funds

Hybrid Mutual Funds

ELSS Mutual Funds

Multi Cap Mutual Funds

Equity Mutual Funds

Thematic Mutual Funds

Aggressive Hybrid Funds

Small Cap Mutual Funds

Large Cap Mutual Funds

Mid Cap Mutual Funds

Liquid Mutual Funds


4. Axis Equity Saver Fund:

The fund invests in equity, debt and arbitrage opportunities. This diversification also helps the investor in risk management and providing regular income, which is ideal as an SWP.


5. Aditya Birla Sun Life Regular Savings Fund:

A hybrid debt fund with some exposure to equity that aims to provide regular income with low volatility. Conservative investors might find this perfect.

Conclusion

One of the best ways to generate a regular income from your mutual fund investments is to set up a systematic withdrawal plan. Picking the correct fund is important so that capital preservation can be done reasonably in addition to reasonable withdrawals. With the Bajaj Finance mutual fund platform, you can look for options and resources to know more about any fund in detail, compare between different funds, and financially be prepared. You can choose from a wide variety and categories of mutual fund schemes and resources that make investing in mutual funds easy and hassle-free.

Frequently asked questions

What is a systematic withdrawal plan?

It is an arrangement where an investor systematically withdraws a fixed amount from his mutual fund investments at regular intervals, retaining the principal invested and generating a continual flow of cash without having to liquidate the entire investment or reinvest it elsewhere.

Which type of funds are best for SWPs?

SWPs are recommended for hybrid and debt funds as they give stable returns with low volatility compared to an equity fund.

How do I choose the right withdrawal rate for my SWP?

You will want to set up a withdrawal rate that is equal to or lower to the funds’ long-term average annual return. For a fund with an average annual return of 8% and withdrawal rates to the tune of 5%-6%, it would be sustainable.

Can I change the withdrawal amount in an SWP?

Yes, most of the mutual fund companies allow an investor to customise SWP withdrawal amount and frequency as required by the investor.

Is there any tax implication on SWP withdrawals?

Yes, SWP withdrawal is liable for capital gain. Short-term capital gains tax applies if the investment is withdrawn less than a year from an equity fund. For debt funds, full withdrawals made before three years are taxed as per the individual's tax slab.

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Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.

Disclaimer

Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319

BFL does NOT:

(i) provide investment advisory services in any manner or form.

(ii) carry customized/personalized suitability assessment.

(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.

In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.

Disclaimer on Risk-O-Meter:

Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.


Disclosure
: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.

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