SWP Calculator: How To Use And Its Benefits
If you are one of the regular investors of mutual funds or you are thinking of becoming a regular investor of a mutual fund soon. Then you must be aware of the terms SWP and SWP calculator. It will help you save time while calculating the value of the investment.
Meaning of SWP
SWP refers to a Systematic Withdrawal Plan where investors are allowed to withdraw from their mutual fund. A withdrawal plan comes up with a monthly, quarterly, half-yearly, or even annual plan. The withdrawal amount gets deducted from the total investment and the remaining balance will continue to gather interest.
Let’s understand this with an example-
Suppose you have 10,000 units of the mutual fund. You have provided a set of instructions to the house of mutual fund to deduct 6000 units per month from your Systematic Withdrawal Plan. On 15 July the fund had a net asset value of Rs 10. In the given case, you will be entitled to the same number of units of mutual fund which is 6000/10 = 600 units. After that 600 units will be redeemed by the house of the mutual fund and give you the amount of 6000. You will still be left with (10000-600) 9400 units in the mutual fund. Similarly, you will be able to continue calculating the units and the amount by changing the Net Asset Value of the scheme.
What do you mean by SWP Calculator?
SWP Calculator (Systematic Withdrawal Plan Calculator) is a calculating-based web tool that identifies the total amount of the investment after withdrawal from the mutual funds. This calculator of SWP includes a box of formulas where the users have to enter four types of information –
- The total amount of investment
- Annual expected rate of return
- Per month withdrawal amount
- Duration of Investment
After entering the above information on SWP calculators, you will be shown the exact result.
Benefits of SWP Calculator
The most common investors in SWP schemes are retirees and senior citizens. To run their livelihood they require a fixed monthly financial input. And in this case, SWP Calculator helps them to provide the same over and above the pension or even alternatively. The benefits of the SWP calculator are as follows:
- The accessibility of SWP calculator is easily available online.
- Operating an SWP calculator doesn’t require any complexity and expertise. Users need to add four types of information including the total amount of investment, withdrawal per month, the expected annual rate of return, and duration of investment and this will help you identify your result.
- In the SWP calculator, it is easy to set the amount which you want every month, and accordingly you can calculate the amount on maturity.
- The Systematic Withdrawal Plan calculates both the monthly returns and also generates a return on the total value of an investment.
- A Systematic Withdrawal Plan helps you in determining the surplus of Systematic Withdrawal Plans, which you otherwise invested in different financial instruments.
How to Calculate SWP?
Calculating the SWP is very simple, you just need to follow some steps which are as follows:
- SWP is an option or a structure and not a product. Choosing an action plan is the first step in calculating the SWP.
- Choosing the specific fund in which you want your SWP is the second step.
- The third step is to choose options like Regular versus Direct or Growth versus Dividend. The best way is to keep the combination of both direct plan and growth option.
- In the fourth step, you need to enter the date of initial investment as well as the initial investment amount. Applicable Net Asset Value (NAV) will be determined by the date of initial investment and this will be your starting corpus.
- Now you have the liberty to choose and have the right to withdraw monthly, quarterly, or even annually.
- In the sixth step, you should decide the period in which you want to be invested.
- At last, the SWP calculator provides you with your result.
(SIPs are done on equity funds. Whereas, SWPs are done on debt funds)
How to Use an SWP Calculator?
The calculator of SWP is a user-friendly tool where you can easily get your information by just filling three columns
- Expected Returns
- Invested Amount
You just need to fill three columns including duration, expected returns, and invested amount to access your result.