They do better in a rising market. Rupee cost averaging can be done even in lump sum investments by investing regularly as and when you feel markets are going down. This means that you have to time the market which is difficult. The other way is you can invest in a good liquid fund and slowly do a systematic transfer in a good equity diversified fund.
This way you can take advantage of rupee cost averaging as well as earn returns in a liquid fund.
For example if you have Rs 50,000 in your savings account and cannot decide at what level to enter the market, you can invest the amount in a good liquid fund. Then slowly do a systematic transfer of Rs 5,000 in a good equity diversified fund. This way you are investing the amount over a period of 10 months and also averaging your cost and avoiding timing the market.
This method is especially helpful in a volatile market. Bear in mind that this can be done between funds of the same fund house. That is the liquid fund and equity diversified fund should be from the same fund house.
Also read: Filing tax returns? Top FAQs
answered!
Advertisement
