Understanding the "Power of Compounding" and "Rupee Cost Averaging"
There are two basic types of interest calculation that can be done – simple interest and compound interest. Simple interest, as the name suggests it calculates interest on the basic amount invested; however, compound interest calculates interest on the interest already earned.
Rupee cost averaging is the technique of buying a particular investment through a fixed amount on a regular schedule, regardless of the price. More quantity is purchased when prices are low, and fewer quantities are bought when prices are high. Eventually the average cost of purchasing a unit becomes lesser and lesser.Systematic investment becomes important when an investor earns a regular income such as salary for meeting his day to day needs. Starting a mutual fund SIP early in your working career and stay invested with it is the best idea.
Disclaimer: Any information contained in this article is only for informational purpose content herein has been provided is to be read from an investment awareness and education perspective only. The views / content expressed herein do not constitute the opinions of self or recommendation of any course of action to be followed by the reader. Investors should consult their financial advisers before taking any investment decision.