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The mutual fund is the process of collecting funds from various investors and investing them into the plan that benefits them in future. The mutual funds will provide regular income to both the investor and the Mutual fund distributor. This a chain that keeps ongoing and receives the regular income.
Want to earn a regular income from mutual funds?
For investors the simple answer to this is SWP. The right way of getting a regular monthly cash inflow of mutual funds is to do it through SWP in debt mutual funds. Many mutual fund distributors suggest the investors to start looking at setting up of Systematic Withdrawal Plan (SWP) in debt mutual funds. Before knowing that why SWP is the solution for earning regularly lets us know what is?
Systematic Withdrawal Plan (SWP) is the plan by which an investor can withdraw aa a fixed amount of money from his current investments in mutual funds. The amount of cash inflow can be set at quarterly, semi-annual or annual as well, depending on the investor’s demands.
Why SWP is the solution to earning regular income?
Your cash flow demands and tax efficiency will be the two agents that will decide why you should opt for SWP option. Let us look at these parts in detail.
Taxation advantages
Although the dividend gained by the investor are tax-free, all non-equity investments bring DDT of 28.84%. The DDT is paid by the AMC although ultimately, it is owned by the investors. In an SWP, each withdrawal is managed as a sale. Withdrawal in 3 years from the date of buying will be interpreted as a short term capital gain. The gains will be added to the investor’s income and taxed respectively. Withdrawal exceeding 3 years from the date of buying will bring long term capital gains tax.
But as the investor will experience indexation benefit, investors are expected to pay a less amount in tax, based on the indexed cost. For equity funds, the short term period is 1 year and there is no capital gains tax on long term gains. So that’s why SWP in debt mutual funds are beneficial for the investor.
Regular cash flows
If you opt for the dividend option, the dividend pay-outs are based on the distributable surplus possible under the scheme and are at the responsibility of the fund manager. Also, the date and amount of the dividend payment might not be in sync with the investor’s demands. The SWP allows investors to withdraw a defined amount regularly, thus marking 2 faults of the dividend option that is quantum and timing. There is a guaranty in SWP that you will get a constant inflow.
In a dividend distribution, when the dividend is divided NAV of the scheme collapses. In an SWP, the amount of units in the scheme of the investor is decreased.
As an overall investment strategy, an investor can park his cash flow wants into a liquid fund and then perform an SWP by the said scheme. This will guarantee that the chance of the capital being consumed by the levity of the equity markets is decreased. And also guarantee that the cash flow demands are met. This will also lessen the impact of levity in the cash flow demands in the overall investment portfolio of the investor.
These factors make the SWP a possible way to receive a regular income from mutual funds. The investors should opt for this. Not only the investors are getting the benefit of regular income from mutual funds the Mutual fund Distributors also receive the same.
How becoming a mutual fund distributor will provide regular income?
Mutual Fund distributor is an individual opening the way for buying and selling units of mutual funds by investors. A distributor collects upfront/trail commission for bringing the investors into the MF schemes. The distributor is liable for building prospectus for the mutual fund, generate comprehensive marketing campaigns, market the units right to the public and give a wholesale market to reach a greater amount of investors. Earnings for mutual fund distributors all depends on the leads he brings for the fund house. It’s estimated that mutual fund distributors earn Rs20 lakh annually.
Let’s understand with an example of how the mutual fund distributor earns and how their earning are regular.
Example
A Mutual fund distributor from a fund house gets a target that he needs to bring about 100 leads in a month. He convinced 80 people to invest in different mutual funds. It’s but obvious every scheme and person invested a different amount of money. After when the money is sent to the houses the total amount he got Rs.80,000 as his monthly commission that is 2% of the total investment of an investor. This an income set for one month.
Next month he got 20 leads extra for investing in mutual funds and that an earned 90,000 from leads (80+20). The amount of income stays 80, 000 and adds on 10,000 to his income and the chain goes on like this, depends on the amount of lead he keeps adding to his target.
At year-end got 10 lakh as his annual income which is fixed for next year as well. This is how the distributor incomes keep flowing and growing.
Just be the certified mutual fund distributor and you can earn a lot. A good Mutual Fund Distributor will explain all investment terms in easy and layman’s language. So that you can evaluate. The words like Scheme Objectives, Investment Portfolio, Risk Involved, NAV, Annualized Returns, or AUM etc. To know all this, we need to put in time and efforts. These 2 things that are usually we short of. That is why we need a Mutual Fund Distributor.
Conclusion
Mutual fund investments are an agent of income for both the investor and mutual fund distributor. Mutual fund distributor earns lots of commission according to but under Sebi guidelines. They provide all details about the mutual fund plan and then convince people to buy mutual fund they are certified by giving NISm exam for being a distributor of the mutual fund.
If you are looking to invest in a mutual fund or trying to become a mutual fund distributor. Get registered with WealthBucket.
We have a vast variety of Mutual Funds being dealt. Be it Balanced Mutual Funds, Liquid Mutual Funds, Income Funds, or Equity Mutual Funds. Call NOW 8750005655. Or email for more details at contact@wealthbucket.in
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