Step-by-Step Guide: How to Use an SWP Calculator for Mutual Funds?

A Systematic Withdrawal Plan (SWP) is a mutual fund scheme that allows you to withdraw a fixed amount from your investment at regular intervals. This provides a steady and regular source of income from your investment. 

But while withdrawing a fixed income through such plans, what happens to your plan?

Interest will continue to accrue on your investment, and if the Net Asset Value (NAV) of your investment increases, it will reduce the number of units being withdrawn. As a result, the remaining balance in the fund will change over time.

An SWP Calculator will help you understand these changes by showing the interest accrued and the remaining balance over time. 

What is the SWP Calculator?

SWP Calculator is an online financial tool that helps you determine how systematic withdrawals will affect your mutual fund investment. It will calculate the remaining balance from your account after every withdrawal. 

How to Use the SWP Calculator? 

Step 1: Enter your Total Investment Amount

Start by entering the total investment amount you have invested in the SWP. For example, let us consider the total investment is ₹1,00,000. This will help the SWP calculator understand the amount from which the regular withdrawals will be made.

Step 2: Enter the Amount of Monthly Withdrawal

Next, enter the fixed amount you wish to withdraw every month from your SWP. In our example, let us assume that the monthly withdrawal is ₹2,000.

Step 3: Enter the Expected Rate of Return

Mention the expected annual rate of return (in %). This will determine the interest accrued on your investment every month.

Step 4: Enter the Number of Months

Specify the number of months you plan to withdraw the fixed amount based on the investment period. This will help the SWP calculator determine the remaining units and the balance amount that would remain at the end. 

Sample Illustration

For example, consider Ms Shilpa’s investment in an SWP. The initial investment is ₹64,000, and the expected rate of return is 7%. He wants to withdraw ₹4,000 every month for one year.

Here is the interest earned and the balance at the end of every month for the first three months.

This process continues throughout the year. With the SWP calculator, you can project this entire schedule in a few seconds.

Key Benefits of Using an SWP Calculator

• Provides accurate estimates of the interest earned and the balance amount every month.

• Allows you to revise the inputs and compare different withdrawal amounts and their impact on the overall investment. 

• Helps in financial planning, especially with reference to a steady and regular source of income. 

Wrapping Up

The SWP calculator is an online tool that helps you determine the impact of regular monthly withdrawals on your Systematic Withdrawal Plan. It is user-friendly and less time-consuming. By providing the necessary information, you can determine the remaining balance of the mutual fund investment every month. 

Ensure you provide the right information to determine the exact amounts. With just a few clicks, you can decide your monthly withdrawals and keep your investment on track.