InvestorQ : Which option is better for investment in Mutual funds - SWP or dividend?
Mitali Bhutta made post

Which option is better for investment in Mutual funds - SWP or dividend?

Sakshi Malhotra answered.
3 years ago
What is SWP?
SWP stands for Systematic Withdrawal Plan, it is a facility using which investors can withdraw a fixed amount from a mutual fund scheme.  The frequency of withdrawal could be monthly or quarterly, you can also customize your cash flows under this plan.

What is Dividend Plan?
Under this plan, investors get the collective amount of dividend declared by different companies in the proportion of their NAV as at the date of distribution of dividend.

What is better?
In the context of money, SWP is considered better as Dividend received under dividend plan is liable to DDT (Dividend Distribution Tax) as well as any capital gains arising thereon above Rs.100,000 shall be taxable in the hands of the investor. Capital gains generally arise on the sale of mutual funds. Another drawback of dividend plan is that dividend is not guaranteed in a mutual fund, as they are subject to market conditions, distributable surplus and profits made by a particular scheme,  therefore it is not necessary that a company or companies in which you have invested money will definitely declare dividend every year.

Hence we can say that it is better to receive money in a fixed period and a fixed amount (which you can decide) rather than being worried about the market conditions. Though SWP has its own disadvantages, it is mostly preferred over the general dividend plan.