Systematic withdrawal plans in equity funds can spell trouble

Withdrawal of units from the portfolio in a falling market can lead to sharp erosion in its value from which recovery could prove difficult

Most investors are familiar with Systematic Investment Plans (SIPs), where you invest a fixed amount every month in mutual funds to generate a corpus over the long term. However, not many are as well aware of the nuances of a close cousin called the Systematic Withdrawal Plan (SWP). In the latter, you withdraw a fixed amount every month from the corpus to generate a regular income. SWPs can come in handy for retirees. A key point investors need to bear in mind is that it is safer to do an SWP in a less volatile fund, such as a low-duration