June 07 , 2012
The Systematic Withdrawal Plan (SWP) is a facility provided in most mutual fund schemes. This allows you to withdraw a fixed amount every month or every quarter from your investment, and take the credit into your bank account. It is the exact opposite of a Systematic Investment Plan (SIP) wherein you make the investment in regular intervals.
The SWP is a useful feature for pensioners to derive regular income from investments. The SWP is sometimes confused with Dividend, but the two are very different. In a Dividend, it is the gains that are paid out regularly, without touching the corpus itself. In an SWP, on the other hand, the fixed amount withdrawn could come from both corpus and gains; so over time your corpus can get drawn down. Dividend therefore gives smaller payments without touching corpus, while SWP gives larger payments by drawing down the corpus over time.