What is systematic withdrawal plan and how does it work?

I recently saw an advertisement about systematic withdrawal plan. How does it work?

Prashant Sarin, Delhi

Systematic withdrawal plan or SWP is a feature offered by mutual funds by which investors can make withdrawal from their mutual fund investments at a pre-determined time interval, like monthly, quarterly, half-yearly or annually. These are the opposite of SIPs, in which one typically makes regular investments.

So, just in the manner in which one invests a fixed amount of money in a fixed interval, say every month, in a mutual fund—in case of a SWP, an investor would withdraw a fixed amount of money every month from a mutual fund. SWP is useful when one wishes to create an income stream from their investments, which many retired people are taking advantage of.

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