Imagine this: You invest ₹50 lakh in 2010. The market crashes immediately. Then again. And again. COVID wipes out 42% of your portfolio. Wars break out. 14 major crashes in 15 years.
Would your retirement plan survive?
Not only did this portfolio survive—it grew to ₹3 crore while withdrawing ₹42.75 lakh.
I’m ABHISHEK CHOUHAN, a NISM-certified (ARN-165168) mutual fund distributor. I spent 4-5 days crunching real historical NAV data to show you exactly what happened—month by month, crash by crash. This isn’t theory. These are real numbers from 2010 to 2026.
What is the 3 Bucket SWP Strategy?
Think of your retirement money like a kitchen:
- Bucket 1 = Pantry (this month’s groceries)
- Bucket 2 = Refrigerator (this week’s meals)
- Bucket 3 = Farmland (next year’s harvest)
You don’t raid the farmland for tonight’s dinner. You use the pantry. When it empties, refill from the fridge. When the fridge empties, harvest from the farm.
TABLE 1: The 3 Bucket Structure
| Bucket | Purpose | Investment | Risk | Timeline |
|---|---|---|---|---|
| 1 | Monthly income + Emergency | Liquid Funds | Zero | 2-3 years |
| 2 | Capital protection + Beat inflation | Hybrid Funds | Low-Medium | 3-5 years |
| 3 | Wealth creation | Equity/Small Cap | Medium-High | 5-7+ years |
The 6% Withdrawal Rule:
Withdraw only 6% of your corpus annually. It’s sustainable for 25-30 years.
Quick math:
- ₹10 lakh → ₹5,000/month
- ₹50 lakh → ₹25,000/month
- ₹1 crore → ₹50,000/month
Calculate your numbers using our free SWP Calculator →
Want to understand the basics first? Read my Complete Guide to Mutual Funds in India → and What is Stock Market: Beginner’s Guide →.
The Real Journey: ₹50L to ₹3Cr
Timeline:
📅 1 Nov 2010: Invested ₹50 lakh
- Bucket 1 (Axis Liquid Fund): ₹12L
- Bucket 2 (ICICI Pru Equity & Debt): ₹18L
- Bucket 3 (DSP Small Cap): ₹20L
📅 1 Dec 2011: Started withdrawing ₹25,000/month (after 1-year wait for tax benefits)
📅 2011-2026: Survived 14 crashes
📅 1 Feb 2026:
- Portfolio value: ₹3 crore
- Total withdrawn: ₹42.75 lakh
- Tax paid: ₹2.48 lakh
Why November 2010? I wanted the worst-case scenario. The investor put money in right before multiple crashes. And withdrawals started during a market crash (European Debt Crisis).
TABLE 2: Portfolio Journey
| Year | Value | Withdrawal | Major Event | Status |
|---|---|---|---|---|
| 2010 | ₹50L | – | Starting | ✅ |
| 2013 | ₹45L | ₹3L | Taper Tantrum | 🔴 -10% |
| 2018 | ₹1.12Cr | ₹3L | NBFC Crisis | 🟡 Recovery |
| 2020 | ₹95L | ₹3L | COVID (-42%) | 🔴 Crash |
| 2024 | ₹2.75Cr | ₹3L | Election boom | 🟢 Peak |
| 2026 | ₹3Cr | ₹3L | Current | 🟢 Strong |
Notice the portfolio went negative multiple times but recovered. That’s the power of staying invested.
14 Market Crashes: The Complete Story
Let’s talk about pain. Here’s every crash this investor faced:
Major Crashes:
- 2011-12: European Debt Crisis (-12%)
- 2013: Taper Tantrum + Rupee Crash (-15%)
- 2018: NBFC Crisis (IL&FS, DHFL, YES Bank) (-21%)
- 2020: COVID-19 (-42%) ⚠️ WORST
- 2022: Russia-Ukraine War (-13%)
- 2022: US Fed Rate Hikes (-11%)
- 2024: Election Volatility (-8%)
- 2025: FII Selloff (-14%)
- Plus 6 more moderate corrections (-5% to -10%)
TABLE 3: Loss Distribution
| Loss Size | Times | Example | Impact |
|---|---|---|---|
| >25% | 1 | COVID (-42%) | Nearly destroyed Bucket 3 |
| 15-25% | 2 | NBFC, FII selloff | Bucket 3 down, Bucket 2 stable |
| 5-15% | 11 | Various events | Bucket 1 & 2 untouched |
The longest bear market: 35 months (Feb 2018 – Jan 2021). Portfolio stayed negative for almost 3 years. Most investors would have quit. This one didn’t.
Need to understand markets better? Check Stock Market Basics →.
How Each Bucket Performed
Bucket 1: The Safety Net
Fund: Axis Liquid Fund
Allocation: ₹12 lakh
This bucket saved everything. While Bucket 3 lost 42% in COVID, Bucket 1 calmly paid ₹25,000 every month.
How it worked:
- Lasted 67 months before first refill
- Earned 5-7% annually (safe returns)
- Never affected by market crashes
- Also served as emergency fund (₹3-4L buffer)
When to refill: Every 4-5 years from Bucket 2.
Bucket 2: The Stability Layer
Fund: ICICI Prudential Equity & Debt (Hybrid)
Allocation: ₹18 lakh
This is the balance that makes everything work. It’s 60% equity + 40% debt.
Performance comparison:
| Event | Bucket 3 (Equity) | Bucket 2 (Hybrid) | Bucket 1 (Liquid) |
|---|---|---|---|
| COVID | -42% 😱 | -18% 😰 | -0.5% 😌 |
| NBFC | -35% | -12% | 0% |
Hybrid funds take HALF the beating of pure equity.
Tax note: When you transfer from Bucket 2 to Bucket 1, it’s a taxable event. Many forget this!
New to mutual funds? Read my Complete MF Guide →.
Bucket 3: The Growth Engine
Fund: DSP Small Cap
Allocation: ₹20 lakh
This is where ₹20 lakh became ₹2+ crore. But it wasn’t smooth.
The roller coaster:
- 2013: Down -25%
- 2017: Up +110%
- 2020: Down -42% (COVID)
- 2024: Up +180%
- 2026: ₹2.1 crore (10x in 15 years!)
Key rule: Never touched for 15 years. This is crucial.
Learn about SIP basics: What is SIP Guide →.
The COVID Nightmare: -42% Crash
March 2020. Markets fell 10% daily. Lower circuits everywhere. This portfolio lost ₹60 lakh in 30 days.
What happened:
- February 2020: ₹1.45 crore
- March 23, 2020: ₹84 lakh (-42%)
- February 2021: ₹1.45 crore (recovered)
The critical decision:
Without 3 buckets:
- All ₹50L in equity → becomes ₹29L
- Withdrawing ₹25k/month depletes it fast
- Forced to sell at -42% loss
- Game over
With 3 buckets:
- Bucket 1 kept paying ₹25k
- Bucket 3 untouched, recovered fully
- No panic selling
- Portfolio thrived
This is why you need 3 buckets.
Tax Reality Check
Everyone talks returns. Nobody talks taxes.
Current rules:
- LTCG: 12.5%
- Exemption: ₹1 lakh/year
TABLE 4: 15-Year Tax Summary
| Period | Withdrawal | Capital Gain | Exemption | Tax Paid |
|---|---|---|---|---|
| 2011-15 | ₹15L | ₹1.8L | ₹5L | ₹0 |
| 2016-20 | ₹15L | ₹8.5L | ₹5L | ₹1.2L |
| 2021-26 | ₹12.75L | ₹9.54L | ₹5L | ₹1.28L |
| Total | ₹42.75L | ₹19.84L | ₹15L | ₹2.48L |
Effective tax rate: 7% (not 12.5%)
Why? Because:
- ₹1L exemption used yearly
- Some years had losses
- Only profit is taxed, not principal
Sequential Return Risk Explained
This is the #1 SWP killer.
The concept:
Two investors, same fund, same amount, different results based on withdrawal timing.
Investor A: Starts withdrawals during crash → Portfolio destroyed
Investor B: Starts withdrawals after recovery → Portfolio thrives
This case study investor started withdrawals RIGHT during a crash. Worst timing possible. Yet survived because of 3 buckets.
Why it worked:
- Bucket 1 handled withdrawals during crashes
- No forced selling from Bucket 3 at losses
- Equity recovered without interference
Before You Start: Critical Checklist
❌ Don’t start SWP without these:
1. Health Insurance
- Family floater: ₹15-25 lakh minimum
- One hospitalization can wipe out your SWP
2. Term Life Insurance
- 10x annual income if you have dependents
3. Emergency Fund
- 6 months expenses OUTSIDE the SWP
4. Right Corpus Size
- Minimum: ₹25 lakh
- Ideal: ₹50 lakh+
5. Emotional Preparedness
- Can you handle -40% losses without panic?
How to Calculate and Start Your 3 Bucket SWP Strategy
Complete step-by-step guide to calculate corpus, allocate buckets, choose funds, and implement the 3 bucket SWP strategy for retirement income in India.
Calculate Your Required Corpus
Determine how much money you need to invest based on your monthly income requirement. Use the 6% withdrawal rule: ₹10 lakh corpus = ₹5,000/month, ₹25 lakh = ₹12,500/month, ₹50 lakh = ₹25,000/month, ₹1 crore = ₹50,000/month. Use our free SWP calculator to get exact numbers for your situation.
Allocate Money into 3 Buckets
Split your total corpus into three buckets: Bucket 1 (Liquid funds) 24%, Bucket 2 (Hybrid funds) 36%, Bucket 3 (Equity funds) 40%. For example, ₹50 lakh = ₹12L in Bucket 1, ₹18L in Bucket 2, ₹20L in Bucket 3. Adjust percentages based on your risk appetite – more conservative investors can increase Bucket 1 and 2 allocation.
Choose Mutual Funds for Each Bucket
Select funds with 10+ year track record and ₹5,000 crore+ AUM. Bucket 1: Any liquid fund (Axis, HDFC, SBI). Bucket 2: Balanced Advantage or Hybrid Equity funds with consistent performance. Bucket 3: Flexi-cap funds for stability or Small-cap funds for higher growth potential. Avoid new funds or those with high volatility in downturns.
Set Up Health and Life Insurance
Before starting SWP, ensure you have adequate insurance coverage. Get health insurance with ₹15-25 lakh family floater plus ₹50 lakh super top-up. If you have dependents, buy term life insurance worth 10-15x your annual expenses. This protects your SWP corpus from medical emergencies and ensures family security.
Wait 1 Year Before Starting Withdrawals
After investing in all three buckets, wait for 1 year before starting monthly withdrawals. This qualifying period helps you avail long-term capital gains tax benefits (12.5% LTCG + ₹1 lakh annual exemption). During this year, your Bucket 1 liquid fund will also earn 5-7% returns, extending your withdrawal timeline.
Start Monthly Withdrawals from Bucket 1
After 1 year, set up systematic withdrawal plan (SWP) from Bucket 1 (liquid fund) only. Withdraw your calculated monthly amount (based on 6% annual rule). Do not touch Bucket 2 or 3 at this stage. Your Bucket 1 will last 4-5 years before needing a refill, giving Bucket 3 time to grow through market cycles.
Refill Bucket 1 Every 4-5 Years
When Bucket 1 runs low (less than 1 year of expenses remaining), transfer money from Bucket 2 to refill it. Sell ₹10-12 lakh worth of hybrid fund units and move to liquid fund. Remember: this switch is a taxable event, so plan it during low-gain years to utilize your ₹1 lakh LTCG exemption efficiently.
Rebalance During Market Extremes Only
Review your portfolio quarterly but rebalance maximum once a year. If Bucket 3 grows beyond 50% of total portfolio (during bull markets), move some profits to Bucket 2. During severe crashes (like -40%), do NOT touch anything – let Bucket 1 and 2 handle withdrawals while Bucket 3 recovers. Patience is key to SWP success.
Key Takeaways
✅ 3-bucket strategy works even in worst conditions
✅ 14 crashes couldn’t destroy it
✅ Patience beats panic
✅ Tax planning saved ₹15L+
✅ Insurance is non-negotiable
✅ 6% withdrawal = sustainable for 25-30 years
❌ What doesn’t work:
- One-fund SWP
- Withdrawing >8% annually
- Panic-selling during crashes
FAQ for 3-bucket strategy
Can I start the 3 bucket SWP strategy with ₹10 lakh or ₹20 lakh?
Yes, absolutely! With ₹20 lakh, you’ll get ₹10,000/month (6% rule). Bucket allocation: ₹5L liquid, ₹7L hybrid, ₹8L equity. However, I recommend building at least ₹25-30 lakh for meaningful monthly income.
Which specific funds should I choose for each bucket in 2026?
Choose funds with 10+ year track record and ₹5,000Cr+ AUM. Bucket 1: Any liquid fund. Bucket 2: Balanced Advantage/Hybrid funds. Bucket 3: Flexi-cap (stable) or Small-cap (growth). As a NISM-certified distributor, I can help with personalized recommendations.
How often should I rebalance my buckets? What’s the process?
Refill Bucket 1 every 4-5 years when it runs low. Rebalance Buckets 2 & 3 only during extreme market conditions, maximum once a year. Remember: every bucket transfer is a taxable event, so plan switches wisely to use your ₹1 lakh annual LTCG exemption.
What if I need emergency money beyond my monthly ₹25,000?
Bucket 1 has ₹3-4 lakh emergency buffer for this. For larger needs (₹5L+), take a loan against mutual funds (9-12% interest) instead of redeeming—this keeps your equity invested during market recovery. Must-have: Health & term insurance before starting SWP!
Is SWP better than dividend option? What about FDs?
Yes! SWP has 12.5% LTCG tax with ₹1L exemption, while dividends are taxed as income (up to 30%+). FDs give 6-7% fully taxable returns; SWP can deliver 10-12%+ with lower taxes. Plus SWP beats inflation and your family inherits the remaining corpus.
Disclaimer: Hypothetical case study for education only. Author is NISM-certified MF Distributor (ARN: 165168). Consult a SEBI-registered advisor before investing.