ET Explainer: Monthly cash flows from mutual funds
Financial planners advise systematic withdrawal plans in a mix of mutual fund schemes for regular monthly income which is tax efficient as well.
WHAT IS A SYSTEMATIC WITHDRAWAL PLAN (SWP)?
SWP is a tool offered by a mutual fund house where an investor can withdraw a fixed amount of money at regular intervals, typically every month. Retirees, senior citizens, or anyone who wants a regular income stream are using this route to manage cash flows. Once a SWP is set up for an amount and a date of your choice, units from your scheme for the corresponding amount get redeemed on that day, and the proceeds are credited to your bank account. The remaining units in the scheme keep moving in line with the markets.
Best MF to invest
Looking for the best mutual funds to invest? Here are our recommendations.
View Details» <div data-placement=«Mid Article Thumbnails» data-target_type=«mix» data-mode=«thumbnails-mid» style=«min-height:400px; margin-bottom:12px;» class=«wdt-taboola» id=«taboola-mid-article-thumbnails-113243179»>WHAT ARE THE BENEFITS?
SWP is a reliable tool for monthly cash flows and works better than a dividend. In the dividend plan of an equity fund, there is no guarantee on the quantum, frequency and date of the dividend. It depends on market movements and the profits available in the scheme for distribution. SWP works better than relying on mutual fund dividends for regular income as it brings stability.
HOW DO SWPS SCORE ON TAX EFFICIENCY?
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