The stages of life differ from each other, such as accumulation and deaccumulation, as do the investment decisions associated with each stage. But needs and wants are constant. Considering the well-known benefits of SIPs, it is customary for the novice/intermediate investor to turn to SIP (Systematic Investment Plan) to accumulate wealth and allocate inheritance fund at the end of the wealth creation journey.
Accumulated wealth is often allocated to major expenses or specific goals and can be quickly depleted without any source of income or appreciation during the deaccumulation phase of life. We cannot help but mention that medical expenses sometimes create a hole in the wallet.
Investors have matured and have solutions, but discipline is still king
Balancing larger expenses and allowing time for capital to appreciate do not go together despite regular expenses. Investors wary of interest rates, inflation and socio-economic independence tend to reduce their risk appetite to preserve capital. They are undecided on whether to gradually return to investing or stay out of it and secure a corpus for expenses and legacy funds or invest in lump sum.
This is where a mature solution comes into play. The approach is to look at plans that will allow you to withdraw a regular amount from your investments at a predetermined frequency as per your needs. Make withdrawals in a disciplined manner, as per your convenience and need, regardless of market fluctuations.
What can a Withdrawal Plan bring to the table?
Investors are skeptical about limited growth related to capital erosion and withdrawal plans. What they don’t understand is that this solution is suitable to support financial planning.
Below is an example of a withdrawal plan created with a Nifty 500 index fund. We can see how it helps investors adjust withdrawals according to their spending and end up with stale funds as capital appreciates despite market downturns such as the pandemic.
Systematic Withdrawal Plan (SWP) Approach: Aim to protect your financial future
Discover an approach to securing your financial future through the Systematic Withdrawal Plan (SWP), a dynamic strategy that offers sustainable wealth management pathways. Let’s examine the key attributes that define the SWP advantage:
1. Recurring Income for Financial Security
Enjoy the peace of mind that comes with receiving regular payments from the funds you invest.
2. Customized Withdrawal Flexibility
Customize your financial strategy with ease. SWP allows you to create a withdrawal plan that suits your individual needs.
3. Wealth Growth through Tax Efficiency
Take advantage of the tax efficiency inherent in SWP. Take advantage of potential tax benefits and optimize your wealth growth.
(Disclaimer: Due to the individual nature of tax implications, investors are urged to consult their tax advisors before investing.)
4. Embrace Rational Investing
Say goodbye to the hassle of trying to time the market. SWP eliminates the need to make hasty investment decisions based on market fluctuations.
Elevate your financial strategy with the SWP approach, an advanced method that harmonizes regular income, efficient asset management, and smart investment decisions. Welcome to a future of financial empowerment where your goals are at the center. Experience the transformative power of SWP and embark on a journey towards sustainable asset management.
(Disclaimer: Mutual Fund Investments are subject to market risks, read all plan-related documents carefully.)
Akhil Chaturvedi is the Business Director of Motilal Oswal AMC.
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