The industry advertises so much about Systematic Investment Plan, there is almost no one who advises people on what happens when you want to withdraw your investment for a goal. This is where Systematic Withdrawal Plan is very important.
Just like investing fully in a bulk is a bit risky, withdrawing in bulk also is a bit risky (unless you have achieved the goal requirement). Think about it – When you invest in a bulk at a particular moment, the risk is that the market falls after you invest and you lose the opportunity to enter the market at lower cost. Now, when you withdraw in a bulk at a particular bulk, the risk is that the market goes up big time after your withdrawal – and you end up losing the opportunity to have made more out of your investments?
So what’s the best way out of this?
Assuming the markets are not unidirectional (not only falling or only going up), the only thing we as investors can do is being Systematic. Invest systematically through Systematic Investment Plan. Withdraw systematically through Systematic Withdrawal Plan.
In short, If markets are unidirectional and going UP,
- Investment – better off investing in BULK
- Withdrawal – better of withdrawing in systematic way
Also, If markets are unidirectional and going DOWN,
- Investment – better off investing in systematic way
- Withdrawal – better of withdrawing in BULK
To conclude from above scenarios, the only thing which is practically possible for a normal investor is to be systematic in both withdrawal and investment.
Also read the details about Systematic Transfer Plan here.
