Mutual funds are a popular investment for people seeking long-term wealth creation. For some investors, the need for a regular income is a priority and this is where a Systematic Withdrawal Plan (SWP) via mutual funds, factors in. SWPs give investors the opportunity to withdraw a fixed sum at regular intervals.
We’ll look at:
- Five among the best mutual funds for SWPs
- With common financial metrics under consideration
For the investor,
Comprehending financial metrics for SWPs via mutual funds – 4 fundamentals
Before initiating an SWP, consider these four financial metrics, among others, to help you understand if the chosen mutual fund aligns with your investment goals.
- Expense Ratio: Represents the annual fee charged by the mutual fund for managing the fund. A lower expense ratio means a higher portion of your investment goes towards generating returns.
- Minimum Investment: Is the minimum amount an investor must contribute to initiate or maintain an investment, in a particular mutual fund. The minimum investment can vary based on the type of mutual fund and investment objective
- Annual Average Return: Measures the annualised rate of return on a mutual fund investment over a specific time period. It calculates the geometric mean of the fund's annual returns, taking into account the compounding effect. Longer time periods provide a more comprehensive perspective of the fund's potential to generate returns.
- Fund Asset Allocation: SWPs are often offered by hybrid funds that invest in a mix of both equity and debt instruments.
By analysing these four essential metrics in context with other factors, investors can develop a well-rounded investment strategy. It is important to note that no single metric provides the complete picture. Investors should consider a comprehensive analysis before making investment decisions. Remember to do your independent research, consult with a financial advisor and review your investment strategy regularly, to know if it aligns with your financial goals.
5 Mutual Funds to consider for an SWP
HDFC Retirement Savings Fund - Equity Plan
| Fund Details | |
| Expense Ratio represents the annual fee charged by the mutual fund for managing the fund | 0.8% |
| Minimum Investment – One Time the minimum amount an investor must contribute to initiate or maintain an investment | ₹100 |
| 5-Year Return | 18% |
Tata Retirement Savings Progressive Fund Direct Plan Growth
| Fund Details | |
| Expense Ratio represents the annual fee charged by the mutual fund for managing the fund | 0.6% |
| Minimum Investment – One Time the minimum amount an investor must contribute to initiate or maintain an investment | ₹5,000 |
| 5-Year Return | 10% |
Edelweiss Balanced Advantage Fund Direct Plan Growth
| Fund Details | |
| Expense Ratio represents the annual fee charged by the mutual fund for managing the fund | 0.5% |
| Minimum Investment – One Time the minimum amount an investor must contribute to initiate or maintain an investment | ₹5,000 |
| 5-Year Return | 12% |
Bank of India Conservative Hybrid Fund Direct Growth
| Fund Details | |
| Expense Ratio represents the annual fee charged by the mutual fund for managing the fund | 1.8% |
| Minimum Investment – One Time the minimum amount an investor must contribute to initiate or maintain an investment | ₹10,000 |
| 5-Year Return | 7% |
SBI Equity Savings Direct Growth
| Fund Details | |
| Expense Ratiorepresents the annual fee charged by the mutual fund for managing the fund | 0.67% |
| Minimum Investment – One Timethe minimum amount an investor must contribute to initiate or maintain an investment | ₹1,000 |
| 5-Year Return | 9.5% |
In conclusion,
An SWP via a mutual fund may be a practical solution for investors seeking a regular income while also preserving capital. The five funds mentioned above provide a range of options catering to different investment objectives. However, before making any investment decisions, it is important to consider your financial goals and consult with a financial advisor.
*Past performance is not indicative of future results. Investing in mutual funds involves market risks.
Disclaimer
The investment options and stocks mentioned here are not recommendations. Please go through your own due diligence and conduct thorough research before investing. Investment in the securities market is subject to market risks. Please read the Risk Disclosure documents carefully before investing. Past performance of instruments/securities does not indicate their future performance. Due to the price fluctuation risk and the market risk, there is no guarantee that your personal investment objectives will be achieved.