Unlocking Regular Income with Mutual Funds: Insights from Ujjawal Pahwa

Ujjawal, a renowned finance influencer and digital creator, shares valuable insights on utilizing mutual funds for systematic withdrawals. This strategy can provide a regular income, making it an attractive option for investors seeking financial stability.

Understanding Systematic Withdrawal Plans (SWPs)

A Systematic Withdrawal Plan (SWP) in a mutual fund allows investors to withdraw money at regular and planned intervals. You can decide the amount you wish to withdraw and the frequency of withdrawals, which is often monthly. This flexibility makes SWPs a convenient tool for managing your finances.

Advantages of SWPs

The primary advantage of an SWP is the provision of a steady income stream. This feature is particularly beneficial for retirees or individuals looking to utilize unused funds for regular expenses. By offering a predictable flow of income, SWPs help investors maintain their lifestyle without worrying about market fluctuations.

Costs and Tax Benefits

Investing in SWPs comes with minimal costs, including an expense ratio of 1-2% for the mutual fund and a nominal stamp duty of 0.0005%. Additionally, SWPs offer tax benefits, as investors are not required to pay any tax deducted at source (TDS) on the funds received through the plan. Moreover, the tax on long-term capital gains (LTCG) from mutual funds is only 10%, which is lower compared to other investments like real estate.

Continued Growth of Remaining Balance

As you withdraw funds through an SWP, the remaining balance in your mutual fund continues to earn returns based on the performance of the underlying assets. This feature ensures that your investment continues to grow even as you utilize the funds for regular expenses.

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SWPs as a Powerful Income-Generating Tool

Ujjawal highlights that Systematic Withdrawal Plans can be a powerful tool for generating income from your savings, especially for retirees or those no longer working. By providing a regular income stream and offering flexibility in withdrawals, SWPs can help investors manage their finances effectively while ensuring their investments continue to grow.