by Michelle Fortes

*Client* : Hi Mr. Advisor , I want to know the differance between  *stock SIP vs Mutual fund SIP* .  Whichone is better & why ? Can u explain both the concepts ?

*Advisor* : Yes sir surely. Why not.

Well,  *stock SIP is averaging and mutual fund SIP is rupee cost averaging.*

Albert Einstein quote…

*Compound interest is the eighth wonder of the world.*

Our quote…

*SIP is nineth wonder of the world.* 

*Client* : Oho.. How !!! 🤔 

*Advisor* : Let say, you want to buy 10  Kg. apple every month…. 

Price of apple in January  – 20 per kg. Your expense is Rs.200, right?

Price of apple in February- 40 per kg. Your expense is Rs.400

The average per kg cost is 20 + 40 = 60 / 2 = 30 per kg.

*This is average and your stock SIP is working on same principle.* 

*Client*: Then what is rupee cost averaging?

*Advisor* : Suppose your budget is to spend Rs. 200 per month on apple. No matter what is the price.

Price of apple in Jan – 20 per kg, so you can buy 10 kg. (200/20)

Price of apple in Feb – 40 per kg. So you have 5 kg. (200/40)

Now tell me the average of per kg apple. 

*Client*: Same 30 per kg

 *Advisor* : No.

Number of kg you bought = 10 + 5 = 15

Total cost = 200 + 200 = 400

Average cost = 400 /15 = 26.66

Now in the above eample  as stock SIP , you bought of  apple is averaged at Rs. 30. per kg.  & as  Mutual Fund SIP , your buying cost is averaged at Rs. 26. 66 per Kg. for the same apples.

*This is Rupee cost averaging. Mutual fund SIP is working on this principle.* 

*Client*: oh great!! So every time our cost per unit is less than its avg.  Now I fully understood rupee cost averaging. It’s awesome..

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