Rupee Cost Averaging
How Kaustabh Learned to
Ride the Market Waves
Kaustabh was 23, just out of a
prestigious engineering college, and already earning his first salary at a
multinational firm. But with great pay came great confusion - especially when
it came to investing. That’s what brought him to Bharadhwaj Investsmart,
the advisory firm run by his friend Rohan’s uncle, Vaidy.
“Uncle, I’ve been told mutual funds
are good. But markets go up and down. How do I know when to invest?”
Vaidy smiled, leaning back in his
chair. “Let me tell you about something called Rupee Cost Averaging, or
RCA. It’s what makes market timing irrelevant.”
Just then, Rohan walked in, fresh from
his afternoon chai break. “I’ve been doing that for over two years now,” he
said, plopping into a chair. “Through SIPs - Systematic Investment Plans.”
Vaidy continued, “RCA is simple. You
invest a fixed amount every month, no matter what the market is doing.
Say you invest ₹5,000 every month into a mutual fund. If the market is down,
you get more units. If it’s up, you get fewer units. Over time, your average
cost per unit smooths out.”
Kaustabh frowned, “But isn’t it better
to invest when the market is low?”
“In theory, yes,” Vaidy nodded. “But
in reality, no one - not even experts - can predict the market consistently.
With RCA, you remove emotions like fear or greed from your investing.
You’re not trying to time the market - you’re letting time work for
you.”
Rohan chimed in, “Like when I started
my SIP in mid-2022. The market dipped later that year, but I kept investing.
Now those lower NAV units are paying off. I didn’t panic. I just followed the
plan.”
Vaidy gestured toward a chart on the
wall that tracked market ups and downs over 10 years. “See that? If you had
invested ₹5,000 per month for 10 years, you’d have seen some months where NAVs
were high, and others where they were low. But in the long run, RCA ensures
you’re not overpaying.”
“And it builds a habit,” added Rohan.
“I don’t even think about it now. My SIP gets deducted automatically every
month.”
“But does this guarantee profit?”
Kaustabh asked cautiously.
“No,” said Vaidy. “Nothing does. But
RCA gives you discipline, consistency, and a better chance at long-term
gains. It’s not about timing the market; it’s about time in the market.”
Kaustabh smiled. “Makes sense now.
I’ll set up my first SIP right away.”
Vaidy leaned forward, “Welcome to the
world of smart investing, Kaustabh. You’ve just taken your first step
toward financial freedom.”
To sum up, Rupee Cost
Averaging isn’t magic - it’s method. Stay consistent, stay patient, and let the
power of compounding do the rest.
Very easy manner of explaining SIP
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