How much should I invest to withdraw Rs 10000 per month by SWP

It seems you are talking about investing in a balanced fund and withdraw a fixed amount through SWP, right? If it is so, then to withdraw Rs 10,000 you should invest at least Rs 13.50 Lakhs (assuming withdrawal rate @9% annual).

However, before investing in the above and starting the SWP, you must be aware about the following –1. SWP helps you draw a fixed amount on a fixed date every month but suitable only if you can take moderately high risk and have an investment horizon of minimum 5 years. Your point that one should not loose from the initial invested amount cannot be addressed as mutual funds being market linked investments is subject to volatility. However, if you remain invested for a long period, it has been found that you get some capital appreciation on your initial investment even after withdrawing through SWP.

2. The profits made on all the SWP withdrawals from balanced fund upto 12 months from the date of investment will attract short term capital gains tax which is currently at 15%. To avoid this, you can start the SWP after 12 months and in that case capital gains will be tax free. Like equity funds, long term capital gains on balanced funds are also tax free.

3. However, if you need regular income immediately and do not want to pay the above short term capital gain tax, you can invest a portion of the lump sum amount in a liquid fund or ultra-short term fund and start drawing a fixed amount immediately. For example – you want to draw Rs 10,000 per month from balanced funds. You can split the investments in two parts –

1) Invest Rs 120,000 in a liquid fund/ ultra-short term fund and draw Rs 10,000 per month during the first 12 months and exhaust the entire investment. However, even after withdrawing your entire investment, some amount will be left in the folio which is your gain from the investment in liquid/ ultra-short term fund. The gains made on liquid/ ultra-short term fund will be added to your income and taxed according to the income tax slab applicable to you.

2) After investing Rs 120,000 in liquid / ultra-short term fund, invest the remaining Rs 12.30 Lakhs on the same date in balanced funds and start the SWP after 12 months. This way, all the SWP withdrawals after 12 months will be tax free.

While you can go through all of the above and try understand what would be ideal for you, we suggest that you should take help of a mutual fund advisor in your city if you are new to mutual funds. If the mutual fund advisor is good, he will help you in preparing your KYC ( as you will be investing for the first time in mutual funds), suggest good funds, help you in your investments and shall also take care to service your investments in future.

With regards to top performing balanced funds, you may consider investing in 1 or 2 funds from this list – ICICI Prudential Balanced Fund, Principal Balanced Fund and DSP BlackRock Balanced Fund.

With regards to your query if it is a good idea to invest in tax free bonds of NHAI, HUDCO and NABARD etc. ? our answer is yes, provided you are in the highest tax bracket.

Hope you find the above useful. Thanks for writing to Advisorkhoj.