Systematic Investments in MF

Securities markets can be volatile; some markets can be more volatile than others. As a smart investor, you should make sure that you buy more investments while the prices are low, and avoid paying inflated prices when the markets are at the peak. However, predicting the time of lows and peaks of a market is next to impossible.

Hence, the concept of Rupee Cost Averaging comes into play. An investor who invests a fixed sum of money at periodic intervals, regardless of market movements or trends, ends up buying fewer securities when prices are high and more securities when prices are low. Using this strategy, you can reduce the Average Cost per unit, and in the long run, build a portfolio that will yield added returns.

Please note, however, that this strategy does not work when prices are on a permanent downslide. Hence, this strategy does not make sense while investing in individual stocks. But for portfolios comprising securities across companies, sectors, issuers or maturities, Rupee Cost Averaging Strategy usually gives good results. With regular investments, you can thus effectively use market fluctuations to your advantage.