• HDFC
• 29 Apr 2017
• Equity Product

HDFC, Tester

Timing the market is the trickiest thing to do for any investor. It is virtually impossible for any investor or even a fund manager to buy a stock at the lowest price and sell the same at the highest price. This is why most financial advisors recommend investing in mutual funds through Systematic Investment Plan (SIP) to benefit from rupee cost averaging (RCA).

Through RCA, a fund manager uses your fixed amounts to buy mutual fund units at fixed points in time irrespective of the prevailing price. The frequency of purchase could be on a daily, monthly or even a quarterly basis. This approach ensures you buy more units when the price is lower and fewer units at higher prices. As a result, the cost per unit over a period of time averages out. Moreover, the risk of investing a lump sum amount in a mutual fund at a wrong time reduces significantly.

RCA works to your advantage if you hold the investment for a long period of time. It is also the best way to beat volatility in the stock market.