Systematic Withdrawal Plan (SWP): Turn Your Investment Into Regular Income

What is a Systematic Withdrawal Plan?

A Systematic Withdrawal Plan, or SWP, is a facility that lets you withdraw a fixed or need-based amount from your mutual fund investment at regular intervals — monthly, quarterly, or whatever schedule the fund offers — instead of redeeming your entire holding in one go. You decide how much you want to receive; the fund sells just enough units, at that day's Net Asset Value (NAV), to release the amount and pay it into your bank account. This continues on schedule until you stop the plan or the investment is exhausted.

For someone who already holds a lump sum — built up over a career, from a maturing deposit, a business sale, or years of saving — an SWP is a way to convert that lump sum into an income stream, while the remaining balance stays invested and has the chance to keep working for you.

How an SWP actually works

Unlike a bank fixed deposit, where the interest rate is contractually fixed for the tenure, a mutual fund's NAV moves with the value of what it holds — bonds, government securities, or shares, depending on the fund. Each time an SWP instalment is paid, the fund manager redeems units worth that amount at the prevailing NAV.

Because the price per unit changes daily, the number of units sold to raise the same taka amount also changes from one instalment to the next. Over time, as units are progressively redeemed, your holding declines unless the fund's growth offsets the withdrawals — which is exactly why the choice of fund, and the size of the withdrawal relative to the fund's return, matters so much.

Who is an SWP for?

Choosing the right fund for your SWP

This matters more than people realise. Not every fund is equally suited to an SWP, and this is the single most important decision an investor makes before starting one.

In short: if what you need is money arriving on a predictable date, a fixed income fund is the more appropriate engine for it. If you can tolerate the amount and timing varying — and have other income to bridge the gaps — an equity fund's SWP can still make sense, and may even pay out more in total over time, just far less predictably.

Two ways to structure an SWP

Once you know which fund you want to draw from, there is a second decision: how the withdrawal itself is calculated. Mutual fund SWPs generally follow one of two designs.

A profit-only SWP protects your principal but pays a variable amount, sometimes nothing at all. A fixed-amount SWP delivers a predictable, unchanging payout, but only as long as the corpus lasts, and needs to be sized carefully against the fund's realistic returns so it doesn't outrun them.

The two designs in numbers

The tables below simulate a hypothetical investment of BDT 10,00,000 made in early January 2024 in Ekush Stable Return Fund (ESRF), using the fund's actual historical NAV. The entry NAV is 10.6800 as on 2024-01-02. These are simplified, illustrative models built for this article — not guaranteed Ekush product features. Actual SWP payouts depend on the terms in force at the time and the fund's real performance.

Starting an SWP with Ekush — what to expect

• Minimum investment

  BDT 5,00,000 (5 lakh) to enrol in an SWP.

• Withdrawal frequency

  Monthly or quarterly.

• Minimum holding period

  1 month from the date of investment before an SWP can begin.

• Choice of SWP type

  Profit-only (principal stays intact, payout varies and can be nil) or fixed-amount (a steady payout, drawn from principal when profit falls short). Tell Ekush which one you want on your SWP request form.

• Mid-month investment rule

  If you invest partway through a month — say, on 14 February — the first possible disbursement date is 1 March, not a pro-rated part-month payment.

• Payouts are not guaranteed

  Under a profit-only SWP, a disbursement only happens if the fund has actually generated a profit for that period. Under a fixed-amount SWP, the disbursement is paid regardless, drawing on principal when needed. Either way, nothing about an SWP payout or the long-term sustainability of your corpus is guaranteed.

Documentation checklist

Exact document requirements can be updated from time to time — confirm the current list, and collect the SWP request form itself, from Ekush before applying.