Investing in one investment tool is insufficient if your long-term goal is to build wealth. As an investor, you should be aware of the significance of diversification, combining various investment tools, long investment tenures, and more. Mutual Funds have existed for a while and proved their worth as an ideal investment vehicle. Mutual Fund Investments are of two kinds: Lumpsum and Systematic Investment Plans.
But there is another way of investing in Mutual Funds called a Systematic Withdrawal Plan. Let us understand this relatively new concept better. And no, they do not work like SIP Mutual Fund.
What is SWP?
Here, you can invest in Lumpsum in Mutual Funds but withdraw a fixed sum regularly at a fixed time. With every withdrawal, your Lumpsum Investment in the scheme reduces while the balance funds from the Lumpsum remain invested. SWP provides regular income.
SWP is ideal for seasoned investors who have accumulated wealth over a period and now wish to regularly use a portion of their wealth to boost their cash flow, especially post-retirement. However, remember you can make most of the SWF method only if you hold a large corpus. Let us understand SWP better with an example:
Say you have invested Rs. 1 lakh in XYZ fund for a year. Suppose you decide to withdraw an amount of Rs. 10,000 monthly. This means that every month your investment amount in the fund reduces by Rs. 10,000. The amount left after withdrawal every month will remain invested. To understand how much to withdraw from the Lumpsum Investment, use the SWP calculator.
How does the calculator assist?
Under the SWP, you must invest a specific amount and withdraw some of the corpus invested each month. Once withdrawn, the amount gets deducted from the investment while it accumulates interest. It is challenging to calculate the monthly withdrawals and total matured sum accurately. With the SWP calculator, you can simplify these complex calculations. It efficiently computes the matured sum as per your monthly withdrawals accurately.
As mentioned, SWP lets investors generate monthly revenues and accumulated sums at the end of the maturity period. Consider this example:
You have invested Rs. 50,000 for a year and an SWP of Rs. 1,000. Interest rates are at 10%. After the end of tenure, the total return on investment would be Rs. 4,565.
How to use the calculator?
The SWP calculator is user-friendly and easy to use for the first time. However, ensure you add all the values correctly. You have three columns: tenure, expected returns, and invested amount. Fill in the values according to your investment plan. Add the values and calculate to find the SWP returns.
How is the calculator beneficial?
Retired people and senior citizens are among the most common investors of SWP. They require fixed monthly financial input. An SWP can provide them and above the pension or as an alternative.
- The SWP calculator assures monthly returns while generating the ROI on the total investment.
- You can set up the amount you wish to withdraw and calculate the maturity amount accordingly.
- Easily accessible online.
- The calculator does not require any expertise to use them. Just add the variables, and the output is ready instantly.
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