Rupee-cost averaging

Rupee-cost averaging is what happens when you invest a fixed amount at regular intervals, like a monthly SIP. Your money buys more units when the price is low and fewer when it is high, so your average cost evens out over time.

How it works

Because you invest the same rupee amount each month regardless of price, the arithmetic quietly works in your favour. When the NAV is low, your fixed amount picks up more units; when it is high, it picks up fewer. Over many months this pulls your average buying price below the simple average of the prices, and it removes the impossible job of guessing the perfect day to invest. You are never all-in at a peak, and you keep buying through the dips when units are cheap.

What it does and does not do

Rupee-cost averaging smooths your entry and takes the emotion and timing out of investing, which is its real value: it keeps you investing steadily through good markets and scary ones. What it does not do is guarantee a profit. Your final outcome still depends on where the market is when you need the money, and in a market that only ever rose, a lump sum invested early would have done better. It is a discipline and a risk-smoother, not a magic trick.

Where you meet it

Every monthly SIP uses rupee-cost averaging by default. Learn the full picture in SIP and mutual funds and SIP vs lumpsum.