Our Funds
Related Links
Tools View All
Knowledge Hub Explore
Investment Frameworks
Insights View All
Obsessed with helping you invest better. Trusted by 50L+ investors*
Services
Don't have a password? Use the 'Forgot Password?' option below.
Uh-oh! No results found. We're on it!
Listening ...
This will help us to improve and provide you a better experience.
WHAT IS RUPEE COST AVERAGING? HOW DOES IT HELP YOU?
An investor education & awareness initiative.
Age old wisdom dictates that you invest your money when the market is low, so that you can earn returns when it starts rising. But entering the stock markets at the lowest possible levels is an instinctive wish of most investors. When stock prices decline, investors should ideally be tempted to purchase their favorite shares and mutual funds. However, often, the temptation is accompanied by the expectation of further decline in prices, which makes investors wait longer. The prolonged wait usually results in inaction and by the time the markets rebound, the wait seems futile. Then there is also another large portion of investors who get emotionally impacted by falling markets and end up not wanting to invest at all as the fall in their invested value paralyzes them. Volatile times cause difficulty in effective investment decision making.
Timing the market accurately is a difficult task which is rarely accomplished on a consistent basis. However, the good thing is that you don’t need to have a crystal ball to earn profits. We’ve got a substitute for you. Introducing Rupee Cost Averaging. This refers to investing fixed sums of money regularly in a particular mutual fund schemes at different points of time and hence, at different NAVs. What automatically ends up happening is that you buy more units at a lesser price and less units when the price goes higher. This results in the average cost of your investment per unit being lower than the average NAV per unit over time. This is one of the most reliable ways to gain from market volatility.
A great way to harness this strategy is through the Systematic Investment Plans (SIPs) facility offered by mutual funds. SIPs are a great way to reduce the average cost of your investment, which in turn, increases the scope of potential gains.
Consider the following example to understand the benefit of Rupee Cost Averaging vis-à-vis investing through SIP or a lump sum amount at a single point of time.
Case 1: Let’s say you invest Rs 2,000 each month through a SIP in equity mutual funds:
Case 2: When you invest Rs 24,000 with a one time, lump sum investment:
From the example above, it is evident that a systematic investment plan is more rewarding in volatile times than lump sum investment not only due to the ability to generate higher returns, but also due to the effect of Rupee Cost Averaging- which lowers your average cost of investment per unit. You can thus avoid the trouble of waiting for the best possible time, or finding the lowest possible levels to invest in the markets.
To summarize, Rupee Cost Averaging implemented through a systematic investment plan enables you to manage market volatility very effectively. However, it should not be taken as a guarantee to earn profits as all equity-oriented investments are subject to market risk. To ensure that you gain the most from Rupee Cost Averaging and SIPs, you need to invest continuously over the long term.
Consult your investment advisor to know more on Rupee Cost Averaging.
Key Takaways
Disclaimer: All Mutual Fund investors have to go through a one-time KYC (Know Your Customer) process. Investors should deal only with Registered Mutual Funds (‘RMF’). For more info on KYC, RMF & procedure to lodge/redress complaints, visit dspim.com/IEID. This is an investor education & awareness initiative by DSP Mutual Fund.
Sign up for our newsletters.
Investor Relations Officer, DSP Asset Managers Private Limited, Natraj, Office Premises No.302,3rd Floor, M V Road Junction. W. E. Highway, Andheri(East), Mumbai-400069, Tel.:022-67178000.
Mutual fund investments are subject to market risks, read all scheme related documents carefully. © DSPAM 2024.
Any information regarding securities offerings, or references to securities offerings, that are contained on these pages do not constitute or form part of any offer of securities for sale or the solicitation of an offer to purchase securities in the United States or in any other jurisdiction where such offer may be restricted. The information in the coming pages is not intended for, and is not to be made available to, persons in the United States (being persons resident in the US, corporations, partnerships or other entities created or organized in or under the laws of the US or any person falling within the definition of the term "US Person" under the US Securities Act of 1933, as amended), wherever located. Any information regarding securities offerings, or references to securities offerings, that are contained on these pages do not constitute or form part of any offer of securities for sale or the solicitation of an offer to purchase securities in the United States or in any other jurisdiction where such offer may be restricted. In no event shall DSP Mutual Fund and / or its affiliates or any of their directors, officers and employees be liable for any special direct, indirect, special, incidental or consequential damages arising out of the use of information / opinion herein. The site, texts, images, designs, pictures, sounds, photographs, animation, and videos together with their layout and more generally all the items contained on this website are the sole property of DSP Asset Managers Pvt. Ltd. This site and all of the elements on this site are protected by Indian Law and by International copyright agreements concerning intellectual property. The content of this website must not be copied, modified, reproduced, distributed, transferred, edited or made accessible to third parties for any purposes whatsoever without obtaining prior permission from the owners of this website. *No. of unique investors who had invested with DSP at any time. ^Includes domestic AUM only, as on Dec 31, 2023 @ copyright DSPAM All rights reserved.
Please share your contact details so we can answer all your queries.
We got your contact details. DSP team will get back to you soon.
Gain access to our latest articles on the world of investments.
Monthly update on all the information related to our funds.
Monthly insights on the economy and markets.
To help you our services, we would be grateful if yo could tell us why:
Mention reason
Describe reason
Update your preferences
The email address [email protected] has been removed from our mailing list. you will no longer hear from us.