The Power Of Rupee Cost Averaging
RCA is the concept of averaging out the price at which you buy equity-based investments. This refers to investing fixed sums of money regularly in a particular investment at different points of time and hence, at different prices. 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 price per unit over time. This is one of the most reliable ways to gain from market volatility.
Equity investments are primarily influenced by market volatility, which reflects the unpredictability of the economy. If you recall the law of demand, people buy more of a good when it's less expensive, and less of it when the price goes up.
The fundamental principle of investing reinforces the same thing. It guides the investor to “buy-low and sell-high”. However, most of the investors end up doing just the opposite. They start buying when the markets are rising and suddenly redeem upon a slump. Ultimately, the average cost of investing increases and returns fall.
The RCA approach is relatively new but hugely popular among sensible investors. The strategy helps them make a profit from the market without taking risks typical of the equity market. The RCA method performs best in challenging market conditions and lets you sail over the volatility in market prices to reap rich dividends in the long term
00:00 Introduction
01:38 What is Rupee Cost Averaging
03:27 The Power of Rupee Cos Averaging in Mutual Funds
05:24 Practical Example - Rupee Cost Averaging
07:30 Advantages of Rupee Cost Averaging
11:23 What is the The Power Of Compounding
11:37 Problems in Rupee Cost Averaging approach
12:51 Conclusion
The Power Of Compounding • The Power Of Compounding