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Rupee Cost Averaging

Background

Rupee cost averaging happens when you invest a fixed rupee amount at regular intervals. You naturally buy more units when prices are low and fewer when prices are high.

Explanation

This mechanism, used in SIPs, reduces timing risk compared to a one-time lump sum. Over time it can lower your average purchase price, though it does not guarantee profits or protect against prolonged downtrends.

Example

If you invest ₹10,000 every month, you might get 500 units at ₹20 one month, 400 units at ₹25 the next, and 667 units at ₹15 later. Across cycles your average cost tends to be lower than the peaks.

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