The abbreviation “SWP” stands for “systematic withdrawal plan,” and it gives investors the ability to withdraw either a portion or all of their capital. For example, if you have 5,000 units left in a mutual fund plan, you have the option of giving orders to withdraw all of the units, which would be equivalent to withdrawing Rs. 3,000. You have the option of establishing instructions to withdraw money on a monthly, quarterly, or annual basis. Calculating how much money you will obtain from your withdrawals can be a time-consuming and annoying process. You can use Systematic Withdrawal Plan calculators that are found online to assist you with this procedure.
What is SWP?
Let’s consider an example to understand the Systematic Withdrawal Plan better. Suppose you invest Rs. 1,00,000 in a mutual fund scheme every year. Now, if you withdraw Rs. 10,000 every month from the scheme, your investment will reduce by that amount. However, that’s not all. The number of units you can withdraw depends on the NAV of the fund. NAV is the per unit value of the mutual fund. So, in this case, if the NAV were Rs. 10, then the number of units you will get by withdrawing the funds would be Rs. 10,000 / Rs. 10 = 1,000.
You would get 1,000 units by withdrawing Rs. 10,000 from your monthly investments.
Likewise, if the NAV were Rs. 20, you would get Rs. 10,000 / Rs. 20 = 500 units.
What is an SWP Calculator?
You can find various tools online that help determine how much you would get by withdrawing from your mutual fund investments. These tools are called SWP calculators. An SWP or Systematic Withdrawal Plan calculator shows your cash flows each time you withdraw from your mutual fund investments. It also lets you know how many units you have drawn and how many remain. Moreover, it also lets you know their future value, depending on the remaining units and their value.
If ‘A’ is the future value of mutual fund investment, ‘PMT’ is the amount you invest, and ‘n’ is the time for which you stay invested, then you can find the value of your investments after the tenure, ‘t’ using the equation, A = PMT [(1+r/n) ^n t – 1)].
How does an SWP Calculator Work?
SWP calculators give you the returns on your mutual fund investments. Using the formula for SWP calculation, A = PMT [(1+r/n) ^nt – 1], these calculators give you how much a sum of money you invest in mutual funds will become at the end of the tenure.
The total amount that you wish to invest (either monthly, quarterly, or annually), the length of time that you intend to keep your money invested, the rate of return that you anticipate, and the amount that you wish to withdraw each month are the necessary inputs. After you have provided the calculator with these inputs, it will then return the following values.
- Total investment.
- The final value
For example, if your total investment over five years is Rs. 5,00,000, the rate of returns that you get every year is 8%, and you withdraw Rs. 6,00,000 in all, then the final value of your investment will be Rs. 5,218, according to the SWP calculator.
You must input these four values into an SWP calculator to get your total investments, withdrawals, and the final value of your investments.
- Total investment
- Expected rate of returns.
Benefits of Using an SWP Calculator
Calculators for SWPs allow you to estimate how much you will receive as part of your withdrawals in addition to the amount that will still be in your account. An SWP enables you to withdraw your investments in a mutual fund over a period of time.
There are many benefits of using an online SWP calculator for estimating the returns of your mutual fund investments.
Easy and Accurate Computation of SWP
The best SWP calculators are handy and accurately estimate your mutual fund investment returns. They are fast and return the values as soon as you give the inputs.
These days, the websites of a number of mutual fund companies have SWP calculators. As a result, you won’t have any trouble locating them on the websites of various mutual funds and other financial institutions.
As mentioned earlier, an SWP calculator asks for four values, including the total investment, withdrawals, their frequencies, the SWP interest rate of return on the investments, and the tenure. You shouldn’t have any trouble inputting these values into the SWP calculators as they offer different methods, including entering the values using a keyboard and sliding them with the help of a mouse.
No Expertise Required
You do not need to be a financial or technical expert in order to input values into the SWP calculator in order to acquire your SWP returns. It is as simple that any unskilled person can also use it comfortably. It is user-friendly and you can get a good understanding of your expected returns in no time. With the help of this calculator, you can easily identify the best plan for yourself and take control of your financial future.
Systematic Withdrawal Plans and their calculators come with a host of benefits. While SWPs allows you to secure your financial future by letting you withdraw your mutual investments when needed, the calculators let you estimate how much you will get out of your withdrawals. A Systematic Withdrawal Plan calculator also tells you about the future value of your investments–helpful information you can use to make more investments. Investing in SWPs helps you plan and save up for retirement, and SWP calculators let you estimate the final value of your assets by also considering inflation. So, as you can see, you can build a corpus by investing in mutual funds and use that corpus carefully when needed with the help of a systematic withdrawal plan.