Difference between SWP (Systematic Withdrawal Plan) and AWOCA (Automatic Withdrawal of Capital Appreciation)
By Anupama Deshpande | February 14, 2018

Most of the Mutual Fund investors are familiar to SWP i.e. Systematic Withdrawal Plan which is a scheme offered by a mutual fund where an investor can withdraw a fixed amount every month/ quarter from his/ her investments. SWP helps an investor to get a regular income from a fund that has grown over a period of time. Likewise, there is also a scheme offered by mutual funds which is known as AWOCA. AWOCA stands for Automatic Withdrawal of Capital Appreciation where an investor can withdraw the amount appreciated over his/ her investments.

In case of AWOCA, the amount is paid only if there is an appreciation in the investment. If there is no appreciation in the fund, no amount will be released to the investor. The main benefit of AWOCA is that the principal invested does not deplete.

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Both the SWP and AWOCA can be opted under open ended schemes of the mutual funds. They are available with flexible frequencies such as monthly, quarterly, half-yearly, annually, etc.

SWP and AWOCA can be stopped or changed any time by giving a simple request at least 10 days prior to its due date.

There are many differences between SWP (Systematic Withdrawal Plan) and AWOCA (Automatic Withdrawal of Capital Appreciation). I will explain these differences one by one.

(1) In SWP, the amount is fixed. In AWOCA, the amount is not fixed & keeps varying. It may happen, in AWOCA, that the investor does not receive amount in any month and in some months, he may received more amount.

(2) In SWP, the amount is regularly paid to the investor on a particular date, no matter it is paid out of appreciation or principal amount. In case of AWOCA, the amount is paid only when there is an appreciation in the investment.

(3) In SWP, the principal may get reduced while in AWOCA, there is no fear of losing principal invested.

(4) SWP is a periodic payout which can be used regular basis whereas AWOCA is not a regular payout.

(5) In SWP, the date, the frequency and the amount to be withdrawn has to be indicated upfront by the investor which will be a fixed amount. In case of AWOCA, the amount to be withdrawn will be limited to the extent of appreciation in the value of the investment but the date & frequency will be fixed.

(6) SWP is useful for retired persons or to those who want a regular income and do not bother amount losing some principal. AWOCA is useful for those who want the payout of the capital appreciated from time to time.