Rupee Cost Averaging

RCA involves investing a fixed amount of money at regular intervals, regardless of the market’s ups and downs. This means buying more units when the price is low and fewer units when the price is high. Over time, this averages out your cost per unit, potentially mitigating the impact of market swings.

If you’re interested in trying RCA, here are some tips:

Choose the right investment: Select a Mutual Fund or other investment option that aligns with your risk tolerance and Investment Goals.

Set a budget: Determine how much you can comfortably invest on a regular basis.

Automate your Investments: Many platforms allow you to set up automatic investments, removing the hassle of remembering each month.

Be patient: RCA requires a long-term commitment. Don’t get discouraged by short-term fluctuations; focus on the long-term benefits

Imagine you decide to invest Rs. 1,000 every month in a mutual fund.

High market: In a month when the NAV (net asset value) is Rs. 100, you buy 10 units (1,000/100).

Low market: In a month when the NAV drops to Rs. 50, you buy 20 units (1,000/50).

By consistently investing fixed amounts, you accumulate more units when the price is low and fewer when it’s high, effectively lowering your average cost per unit.

Reduces impact of market volatility: RCA protects you from the emotional trap of investing more when the market is high and less when it’s low. It helps you avoid buying into peak prices and potentially benefit from market corrections.

Promotes discipline: Setting up a recurring investment automatically like an SIP enforces discipline, which can be crucial for long-term success in the market.

Compounded returns: By purchasing more units at lower prices, you automatically compound your returns over time, potentially boosting your long-term wealth.