FREEDOM / WISE
Worked ExampleHand-crafted

What does rupee cost averaging actually deliver across volatile vs steadily rising markets?

Scenario

₹10,000 monthly SIP into an equity fund over 12 months. Compare a volatile-then-recovering market scenario vs a steadily rising market scenario.

Inputs

Horizon months
12
Monthly sip INR
10000

Calculation

  1. 1.

    Volatile market: avg cost basis per unit

    Total invested ÷ total units → ₹219

  2. 2.

    Volatile market: avg NAV across 12 months

    simple average of monthly NAVs → ₹230

  3. 3.

    Volatile market: end NAV ₹280, year-end corpus

    507.5 units × ₹280 → ₹1.42 L

  4. 4.

    Steadily rising market: lumpsum at Jan would have beaten SIP

    60% more terminal value typically → see scenariovaries

Conclusion

In a volatile-then-recovering year, SIP's average cost basis (₹219) is below the year's simple-average NAV (₹230), producing structural advantage. In a steadily rising market, lumpsum at January wins because it's fully invested while SIP money sits in cash for months. Across long horizons with multiple cycles, SIPs deliver close to fund's CAGR.

Tradeoffs

SIP wins when fund has volatility (most periods); lumpsum wins in rare straight-up years. For salaried investors with monthly cashflow, SIP is the only realistic vehicle — the comparison is moot. For windfalls, staggered deployment (STP over 6-12 months) typically beats both pure SIP and pure lumpsum for behavioural reasons.

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