How to withdraw Rs 40,000 per month from mutual funds with a SIP of Rs 5,000?

How to withdraw Rs 40,000 per month from mutual funds with a SIP of Rs 5,000?

by 5paisa Research Team Last Updated: Dec 13, 2022 - 10:20 am 19.2k Views
Listen icon

Mutual funds have two important tools such as SIP and SWP. In this article, we have explained how you can withdraw Rs 40,000 each month with SWP, by investing in SIP of Rs 5,000 each month.

Mutual fund is one of the best tools available for retail investors who cannot invest enough time and energy in researching individual securities and making a portfolio. Interestingly, mutual funds have two most essential tools available – SIP & SWP.

A Systematic Investment Plan or SIP is a tool that helps you invest a specific amount periodically for a precise period. Periodicity ranges from daily, weekly, monthly, quarterly and annually. SIP is especially helpful to inculcate a habit of disciplined investing.

Systematic Withdrawal Plan or SWP is a mutual fund tool that helps you to gradually withdraw a pre-decided amount for a specific period or till the balance lasts, whichever is earlier. Using this tool usually helps to withdraw the required amount without stopping the growth of the unwithdrawn amount.

Now the question is how to get Rs 40,000 each month, by investing Rs 5,000 a month. Let’s assume that you invest Rs 5,000 in a SIP setup that earns returns of 10% for the next 25 years. This accumulates to Rs 62.16 lakh in 25 years.

Post 25 years, you invest the accumulated lump sum in a portfolio of mutual funds that fetch returns of around 8%. Then from 26th year, you can withdraw Rs 40,000 every month for the next 40 years.

This strategy is most suitable for retirement goals. This is because after retirement the income for most people is on the lower end. This, however, is provided that you are not working anymore. 

Moreover, the expenses during retirement are also at the higher end assuming the occurrence of health issues. And as you age even health insurance becomes costly, not to mention tonnes of exclusions.

How do you rate this blog?

Start Investing in 5 mins*

Rs. 20 Flat Per Order | 0% Brokerage

oda_gif_reasons_colorful

About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Disclaimer

Investment/Trading in securities Market is subject to market risk, past performance is not a guarantee of future performance. The risk of loss in trading and investment in Securities markets including Equites and Derivatives can be substantial.
Open Free Demat Account
Resend OTP
Please Enter OTP
Mobile No. belongs to

By proceeding, you agree to the T&C.

Latest Blogs
Weekly Market Outlook for 4th March to 8th March

In the week gone by, Nifty traded with higher volatility as the index corrected during mid-week upto 21860, but it then witnessed a smart recovery to register new record high and the index ended the week just below 22400 with weekly gains of three-fourth of a percent.

Best EV Stocks in India 2024

As India shifts to a greener future, the electrically powered cars and trucks market will rise significantly in 2024. This article investigates the best EV stocks in India, highlighting firms leading the way in innovation, sustainability, and market capitalization.

Best Banks in India 2024

Navigating the many options for banking services becomes a crucial task for both individuals and enterprises as we enter the Indian financial scene in 2024. The top banks in India provide a wide range of services that extend beyond traditional banking, serving as cornerstones of the country's financial stability. These best banks in India offer individualized client care and state-of-the-art digital solutions that reflect the changing needs of the financial industry.