SWP vs FD : Choosing right investment is very important as it will give you mental peace and steady return. There is lot of buzz in market about Systematic Withdrawal Plan (SWP) and too much negative thoughts on FD ( Fixed Deposite).
In this article we try to know about SWP vs FD in detials. Lets starts !
Table of Contents
What is SWP ?
Systematic Withdrawal Plan (SWP) is a method in which investor buy Mutual Fund Units in Bulk and Sell Mutual Fund Units partial on Monthly basis.
For Example,
Mr. Alok bought 1000 units of mutual fund once and Set 10 units Per Month. One can also set SWP in Amount also.
Like buy Mutual fund worth 10,00,000 and sell Mutual fund worth 10,000 Per Month. By doing SWP Investors enjoy the martket growth and Monthly withdrawal also.
Benefits of SWP (Systematic Withdrawal Plan)
There are many Benefits of SWP, those are given below ;-
- Investors get consistant income every month. We have SWP Calculator in which you can calculate the income by SWP. You can also check SWP Calculator Excel Sheet that will do calculation in Excel sheet.
- Investors can expact high return compare to other investment instrument.
- SWP investors can choose the monthly withdrawal amount and duaration according to their need.
- Investment in SWP is taxable but it attract Capital Gain Tax on one sold mutual fund unit.
What is FD ?
FD (Fixed deposite) is very old style of investing. Most of the old generation people like to invest in FD. FD (Fixed deposite) is investment instrument in which investor invest amount and enjoy interest income.
These interest can be withdraw monthly, Quaterly or Half Yearly.
Benefits of FD
Benefits of FD ( Fixed Deposite) are given below :-
- FD offers fixed interest rates, ensuring stable income. Check our FD Interest Calculator Excel to calculate FD interest in excel sheet.
- It is a safe investment with no risk.
- 5-year tax-saving FDs provide benefits under Section 80C.
- Premature withdrawal is possible with a penalty.
SWP vs FD Key Differences
| Feature | SWP | FD |
|---|---|---|
| Returns | Market-linked, income may be higher | Fixed and guaranteed Income |
| Risk | Moderate, depends on market conditions. | Low Risk , Secure investment |
| Taxation | Capital gains tax applicable | Interest taxed as per income slab |
| Liquidity | High, flexible withdrawals | Can withdraw early with penalty |
| Inflation Protection | Better suited for inflation beating | Returns may not always outpace inflation |
Which is Better SWP vs FD ?
FD
- FD is safer, but SWP may provide better returns if invested in good mutual funds.
- FD is ideal due to its fixed returns.
SWP
- SWP (Systematic Withdrawal Plan) is better as it allows market-linked appreciation.
- SWP is more tax-efficient in the long run.
Conclusion
Both SWP vs FD can be ideal for invesotrs but selection of any of them is depend on the risk taking capacity and expection of return.
One who like to gorw with market and able to take risk, then they should go for SWP.
Other hand who do not want to take risk and want income without risk than FD would be better investment and enjoy risk free interest income.
FAQs
Which is better for retirees, SWP or FD?
Retirees with a moderate risk appetite may prefer SWP, while risk-averse retirees may opt for FD.
Can I withdraw money anytime from SWP and FD?
SWP allows flexible withdrawals, but FD has a fixed tenure, and premature withdrawal may incur a penalty
Can I use both SWP and FD for income generation?
Yes, combining SWP and FD can create a balanced portfolio with stability and growth.