Is SWP from midcap mutual funds right

Your idea of drawing a regular income through SWP is good but the funds selected by you may not be ideal for this purpose. Please note that investing in mid & small cap funds has the highest risk and drawing regularly from these funds may harm your long term investment needs.

Moreover, your idea of drawing Rs 20,000 per month from an investment of Rs 10 Lakhs is very high. In fact you want to draw 2% per month! We think this will severely harm your long term returns and deplete the corpus very fast

To draw regular return from mutual funds, balanced funds are better option. You can invest in balanced funds and draw 8-9% annual (around 0.75% monthly) after one year from the date of lump sum investment in the balanced funds. This will ensure that gains made on each SWP withdrawal after one year is tax free!

However, if you want to draw through SWP from mid and small cap funds or any other equity fund, you should give the fund sufficient time to grow and then you can decide to withdraw. Starting the SWP immediately after the lump sum investment is not suggested. Moreover, you should not draw more than 8-9% annual from your investments in balanced funds or equity funds.

Hope the above helps! Thanks for writing to Advisorkhoj.