Let's see how these two work.
How Rupee Cost Averaging Works?
Rupee cost averaging balances the high and low costs of mutual fund units
(called Net Asset Value or NAV), thus making market volatility work in
favour of investors allowing you to achieve a lower average cost per unit.
Consider this hypothetical example of two investors:
|invests 1,000 units for Rs. 10,000 a month @ NAV Rs.10.
||invests 12,000 units for Rs. 1.20 Lakhs for same NAV.
|NAV (net asset value)
falls due to market volatility
|Fund's NAV falls to Rs. 5, Investor A gets Rs. 2,000 units for same cost. fall in NAV.
||NAV falls but Investor B won't get benefit of this
Monthly investing benefits the Investor A so when NAV falls, Investor A could buy more units compared to Investor B who gets
fixed units. Investing through SIP benefits you in market volatility.
How compounding works?
Compounding earns a return on every rupee, as your initial principal increases, it gives you the ability to gain higher returns. Consider this hypothetical example of two investors:
Power of Compounding: Key is to start early
||Rs. 5000 per month
starting at age 25
||Rs. 10000 per month
starting at age 35
|Total Contributions at age 65
|Corpus at age 65 with
(contribution minus corpus)
Investor B never catches up A and the difference is substantial. Save yourself from facing Investor B's situation.
Monthly SIP today, can make you a Crorepati tomorrow. Interested?
Call Bajaj Capital executive who will exactly tell you how you can SIP you way to your 'Crorepati' dream. We have done this for over
50 years now and we would like you to benefit from our experience too.