Those who invest in the equity market for the long term even opting for a SIP route, concern about the market crash which could happen at any given point without prior intimation. Your SIP after some point in time just becomes a lumpsum investment. Therefore whether you had invested at one go or on a recurring basis, the accumulated value is prone to volatility and market mercy. While it’s important to invest regularly, one should also have an exit plan. Now how can one protect their portfolio from such unforeseen events like a black swan?
One strategy is a Systematic Withdrawal Plan (SWP) which is the opposite of SIP. When you set up an SWP, a fixed amount from your corpus is systematically transferred directly to your bank account at the chosen interval, and therefore, you don’t exit at one go.
In fact, there is a formula for when one should start SWP. Ideally, if your goal is five years away, one should go for opting SWP from aggressive fund to conservative ensuring withdrawal amount to be distributed over a span of 60 months. This will mitigate the risk of withdrawing money at the bottom of the market crash.
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