What is Rupee-cost averaging?

It is a process to buy something of value at various price points by spending the same amount of money. As a result the aggregate cost of acquisition of the total amount averages out over time as one buys more of the same when the price is low and less when the price is high. Rupee-cost averaging is a popular method of investing in mutual fund, stocks, bonds etc.

For example, you start investing in a mutual fund scheme through a monthly SIP of Rs 3,000. When the NAV of the schemes is Rs 20, then 150 units of the scheme will accrue to your portfolio. As the NAV of the scheme rises over time, you will get less number of units. This way say when the NAV reaches Rs 30, if you have not increased your monthly SIP amount, 100 units of the scheme will accrue to your portfolio.

However, if for some reason the NAV of the scheme slides to Rs 15, with the same SIP amount, 200 units will accrue to your portfolio.