What is Partial SWP? Reverse SIP? Understand How to Choose an SWP Plan

An SWP plan lets you withdraw a fixed amount from your mutual fund at regular intervals instead of redeeming the entire investment at once. The remaining corpus stays invested in the market. When choosing an SWP investment plan, consider how much income you need, how long you need it for, your risk appetite, fund performance, costs and whether your withdrawal amount is sustainable. 

SWP (Systematic Withdrawal Plan) in mutual funds is a facility that allows you to withdraw a fixed amount from your corpus (say, monthly or quarterly). 

Instead of redeeming your entire mutual fund investment at once, you withdraw only a partial portion. 

Okay, and what happens to the balance? It continues to remain in the fund and stays invested in the market. Such an option is mostly used by retirees and investors who need a regular income for living expenses. 

Looking to invest in SWP funds in 2026? Read this article to first understand the working of an SWP investment plan and then learn how you can pick the “right” scheme for the SWP plan in 2026. 

In an SWP plan, the AMC (Asset Management Company) sells/redeems a partial number of units at the prevailing NAV (Net Asset Value) on your behalf. This allows you to receive a fixed periodic income. For example, 

• Let’s say you invest ₹10 lakh in a mutual fund.

• You set up an SWP of ₹20,000 per month.

• Now, the AMC sells units worth ₹20,000 every month.

• You receive the amount directly in your bank account. 

• The balance corpus stays active in the market.

For more clarity, let’s learn from scratch how SWP funds function:
 

For several new investors, the selection of an SWP plan revolves only around choosing the highest-return fund. But that’s the wrong approach! The right SWP mutual fund plan depends on:

• Your income needs

• Risk tolerance/ appetite

• Investment horizon

• Sustainability of withdrawals

Let’s understand how you can choose a SWP investment plan following the five easy steps in 2026:
 

Step 1: Define Your Income Requirement

Before choosing an SWP in a mutual fund, you must calculate your “income needs”. This means deciding:

• What is the exact amount you want to withdraw (amount)?

• How often do you need it (frequency)?

• How long should the withdrawals continue (duration)?

These three factors determine whether your investment corpus can support your withdrawals. In this step, you may take these two actions:

The advantage of such planning? It prevents capital erosion and makes sure that your SWP supports your financial needs for the intended period.

Step 2: Assess Your Risk Profile

The type of mutual fund you choose for SWP depends on your ability to handle market fluctuations. Always remember that different fund categories carry different risk levels. Let’s see how different fund types behave when used for an SWP:

The final choice should match your risk tolerance, income dependency, and investment horizon.

Step 3: Check Fund Performance

When selecting an SWP fund, do not base your decision only on recent high returns. A fund may perform strongly in one year but underperform in other periods. Since SWP involves regular withdrawals, “stability across time” is more important than short-term spikes in returns.

Okay, so what should I review? You can review measures like rolling returns, alpha, Sharpe ratio, and drawdown when assessing the performance of a mutual fund. Let’s see how you can do it:

Step 4: Evaluate Expense Ratio and Exit Load

The expense ratio is the “annual fee” charged by the mutual fund for managing your investment. It is deducted from the fund’s assets daily, and its impact is reflected in the Net Asset Value (NAV) of the fund.

On the other hand, an exit load is a “percentage-based charge” applied when you redeem units within a specified period (example, within 30 days from investing). 

Note that both a high expense ratio and an exit load can reduce your take-home SWP amount. Thus, as an investor, you should compare schemes within the same category and prefer those that:

• Have a lower expense ratio relative to peers and

• Have minimal or no exit load for your intended holding period

Step 5: Ensure Withdrawal Sustainability

Realise that in an SWP investment plan, every withdrawal reduces your total investment. Now, if withdrawals are higher than the returns generated by the fund, your corpus may quickly decline and be exhausted. 

For example:

• Suppose you invest ₹10 lakhs in an ETF that tracks the NIFTY 50 index as its benchmark. 

• The scheme generates an average return of 12.42%* per year.

• You are withdrawing ₹50,000 per month from it.

• Your annual withdrawal becomes ₹6,00,000 per year (₹50,000 per month × 12 months).

• This is an annual withdrawal rate of 60% ((₹6,00,000 / ₹10,00,000) x 100).

• Your “annual return” on ₹10 Lakh would be ₹1,24,200 per year (12.42% of ₹10,00,000). 

• If we compare “return vs withdrawal”, you are withdrawing ₹4,75,800 more than the annual return (₹6,00,000 – ₹1,24,200).

• This means most of the withdrawal will come from your principal.

• Roughly, your corpus will last for approximately 1.5 to 2 years.

• Reason? The fund is earning only 12.42%, but you are withdrawing 60%.

So, what can you learn? Ideally, while choosing an SWP investment plan, your “withdrawal rate” should be much closer to the “expected return rate”. 

*The above return has been assumed in accordance with the AMFI Best Practice Guidelines Circular No. 109-A /2024-25. The benchmark considered for the above equity funds is the NIFTY 50 Index.

So now you know that SWP = reverse SIP. In this method, you first invest an upfront capital or accumulate a corpus through regular SIPs. Then, you withdraw a fixed amount at regular intervals from the scheme. 

The AMC redeems the required number of units on your behalf at the prevailing NAV and credits the money to your bank account. The remaining units stay invested and continue to participate in market movements.

To pick the right SWP investment plan in 2026, you may:

• Define a “realistic withdrawal amount” based on your corpus size

• Match fund type with your risk tolerance

• Shortlist schemes based on rolling returns, alpha, Sharpe ratio, and maximum drawdown of the scheme

• Compare expense ratio and exit load with peers

• Keep the withdrawal rate closer to the expected rate of returns

Such planning makes sure your SWP investment plan supports your income needs for the intended duration. 

1. What is a partial SWP and how do I set one up in 2026?

A partial SWP plan lets you withdraw a chosen amount from your mutual fund investment at regular intervals while the remaining units stay invested. To set one up, select the scheme, withdrawal amount, frequency, and SWP date. On each date, the required number of units is redeemed at prevailing NAV to make the payout.

2. Should I choose a fixed-amount SWP or a percentage SWP?

Consider your cash flow needs when choosing between SWP perpercentage or fixed amount. A fixed-amount SWP plan gives you a set payout each time, making it easier to plan regular expenses. However, when the NAV falls, more units have to be sold to provide the same amount. A percentage-based withdrawal adjusts with your portfolio value, so you withdraw a smaller amount when markets fall, which may help slow down corpus depletion during a downturn. However, the withdrawal amount keeps changing, making it harder to plan regular expenses. 

3. How much can I withdraw monthly without depleting my corpus?

There is no fixed monthly withdrawal rate for SWP plans that can guarantee your corpus will not decline. It depends on your SWP investment returns, withdrawal amount, market conditions, and how long you need the corpus to last. A higher withdrawal rate can deplete the investment faster, particularly if returns are weak or markets fall consistently.

4. Is SWP taxed as income or as capital gains?

SWP withdrawals are treated as mutual fund redemptions, so only the capital gain portion is taxable, not the entire withdrawal amount. Each withdrawal includes part of your original investment and any gain on the units redeemed. Units are generally redeemed on a FIFO (First In, First Out) basis, which determines their purchase cost and holding period for calculating tax. 

5. Can I run an SIP and an SWP at the same time?

Yes, you can have an SIP and SWP running at the same time, subject to the scheme’s terms. An SIP regularly adds money to a mutual fund, while an SWP regularly redeems units. 

6. What happens to my SWP if the market falls?

Your SWP plan can continue during a market fall. However, if you have a fixed SWP amount, a lower NAV means more mutual fund units need to be redeemed to make the same payout. If markets remain weak for a long period, this can cause your investment corpus to reduce faster.

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