Mutual Fund SWP vs Post Office Monthly Income Scheme (MIS): Which has provided more monthly income on Rs 9 lakh investment in 5 years? Get calculations

Mutual Fund SWP vs Post Office Monthly Income Scheme (MIS): Investors use Systematic Withdrawal Plan (SWP) in a mutual fund and Post Office Monthly Income Scheme (MIS) for getting monthly income. Both investment instruments are different in nature. While SWP is market-linked, post office MIS offers guaranteed return. However, investors use both of them to get monthly income. Know what the basic difference is between the two investment options and what Rs 9 lakh investment in each scheme has provided in five years.

What is SWP?

Investors can start SWP in any mutual fund, be it equity, hybrid, or debt.

In a SWP, investors make a one-time investment in a mutual fund scheme and fix a monthly withdrawal amount.

The fund house sells the net asset value (NAV) units from the investment every month and provides income to the investor.

Since the NAV rate changes every day, the mutual fund house sells different numbers of NAVs every month.

When the NAV rate is higher, the fund house will sell fewer units; when the rate is lower, the fund house will sell more.

Senior citizens often use SWP to get a monthly pension.

Here one thing is important: if the rate of withdrawal of monthly income is quite lower than the rate of return in the mutual fund scheme, investments won't deplete for decades.

E.g., if the rate of return is 8 per cent annual and the rate of withdrawal is 5 per cent, the fund will give the monthly income as well as keep growing.

What is Post Office Monthly Income Scheme (MIS)?

MIS, on the other hand, is a guaranteed return scheme where the investor gets the monthly income in the form of an interest rate, which is 7.4 per cent at present.

One can have a single or a joint account in the scheme.

The minimum investment in the scheme is Rs 1,000, while the maximum investment in a single account is Rs 9 lakh and in a joint account is Rs 15 lakh.

Once the investor makes a deposit, their money is locked for five years, and they get a monthly income in the form of interest. After five years, they get their principal amount back.

SWP vs Post Office MIS: Which has given more on Rs 9 lakh investment in 5 years?

Since in a single MIS account, one can deposit a maximum of Rs 9 lakh, we are taking that as the figure for our calculations. 

In post office MIS, on an investment of Rs 9 lakh, one gets a fixed monthly income of Rs 5,550 for 5 years.

For SWP, we are taking historic returns of the top 5 medium to long duration debt mutual funds. The reason for taking this mutual fund category is that it has its maximum investment exposure to debt, and here, investors can park their money for 5 years and over. 

We are taking the examples of the top five medium to long duration debt mutual funds, where investors with Rs 9 lakh investments made five years have got at least Rs 17,000 monthly income.

The funds under discussion are-

SBI Magnum Income Fund-Regular Plan-Growth, ICICI Prudential Bond Fund - Growth, Aditya Birla Sun Life Income Fund - Growth - Regular Plan, Kotak Bond Fund - Regular Plan Growth, Nippon India Income Fund - Growth Plan Growth Option

The difference is that while in the post office MIS scheme, the investor gets Rs 9 lakh back after years. In case of mutual funds, after withdrawing Rs 17,000 a monthly for 5 years, the highest amount left in a fund was Rs 61, 164.