SWP vs SIP: Which Mutual Fund Strategy is Right for You

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Have you ever asked yourself, "Should I choose SWP or SIP?" If so, here's what you should know about it:

Yes, theoretically, a SWP and SIP are equivalent. They are the opposite ends of the same spectrum, each demonstrating a distinct feature of investing in mutual funds.

The main feature that differentiates them is their function. SIPs allow you to invest a specific amount in mutual funds, while SWP gives you the functionality to withdraw a fixed amount from a mutual fund plan.

Instead of deciding between these two, consider asking, "Will having both be beneficial?" If yes, why do you need SWP and SIP?

In this comprehensive evaluation, you will learn how these two methods work and receive a list of the Best SWP Plans in 2024. 

Let's begin with the meaning and benefits of SWP and SIP separately.

What is the SWP or Systematic Withdrawal Plan?

A SWP, or Systematic Withdrawal Plan, is an easy way to withdraw money from your mutual fund investments on a fixed date. It is an excellent source to earn your regular income. Plus, you can select at what time you want to withdraw: monthly, quarterly, half-yearly, or yearly.

What are the Advantages of SWP?

Here are some benefits of including the best SWP mutual fund for your portfolio:

1. Regular Income: The opportunity to invest in SWP is also suitable for retirees or for people who need additional small but constant income.
2. Capital Preservation: Free cash is less of an issue under SWP because the capital through which one invests does not get depleted as fast as it does under pure lump-sum withdrawals; this is because, under SWP, you invest a given amount and only withdraw a given amount at a given interval.
3. Tax Efficiency: For instance, SWPs are preferred to fixed deposits from a tax perspective if the holding period of the SWP is more significant than three years and where taxes at higher capital gains tax brackets are charged.

What is SIP or Systematic Investment Plan?

In simple words, SIP stands for a systematic investment plan. This means that as an investor, you invest a fixed amount regularly in a mutual fund scheme. Moreover, you can start SIPs in the Best Mutual Funds at just Rs.100. This reliability keeps SIPs affordable and accessible for investors who can only spare little money from their monthly earnings.

What are the Benefits of SIP in Mutual Funds?

The following points offer multiple advantages of investing in SIP:

1. Disciplined Investing: Unlike other communication technologies, where you take a big break and incur costly processes, SIP means you continually invest, which in turn fosters discipline in managing your resources.
2. Rupee Cost Averaging: To average the NAV (Net Asset Value), units are bought more when markets are low and less when markets are high.
3. Long-term Wealth Creation: For this reason, many long-term goals, such as saving for retirement, buying a house, or paying tuition fees for children, are suited to SIPs.
4. Flexibility: SIPs allow investors to choose their investment amount and period and to change them according to market conditions.

SIP Vs SWP- What is the Difference?

First things first, you should know that the systematic withdrawal plan (SWP) and systematic investment plan (SIP) are both systematic and strategic approaches. Through these, you can easily invest and withdraw your money from mutual funds.

Moreover, SIPs will fulfil your need to save money regularly. This technique contributes towards long-term capital appreciation. Likewise, SWP plans are suitable for investors looking for a regular source of income. You can benefit from this systematic withdrawal plan to pay for your EMIs and child's fees while parallelly earning high returns on investments.

Pro Tip: Try Out the Viral SIP Calculator Tool for Estimated Returns. 

10 Best Mutual Funds for SWP or SIP in India

The following are the 10 best systematic withdrawal plans for you to invest:

Final Words

In short, you will need both SIP and SWP at some point in your life. It's best to start mutual fund investments with a systematic investment plan when you are in the early phase and want wealth accumulation. Now, when you are about to retire, gradually shift to a systematic withdrawal plan for regular income. Thereby killing two birds with one stone.

1.  5 Best SIPs Plan to Secure Your Family's Financial Future

2.  What is SWP in Mutual Funds?

3.  Can SIP go in Loss?