New Delhi, Nov. 25 -- A systematic withdrawal plan, or SWP, is a structured way to draw money from your mutual fund investments. It works as the opposite of a systematic investment plan (SIP). Instead of investing at regular intervals, you withdraw a fixed amount at a set frequency. SWPs are especially useful for a steady cash flow without redeeming the entire investment at once.

Setting up an SWP is direct. You select a mutual fund you already hold, decide the withdrawal amount, and choose how often you want the money-monthly, quarterly or annually. Once the SWP starts, the fund redeems the required number of units and transfers the money to your bank account. The remaining units stay invested.

Behind this simple process is an importan...