'Rupee Cost Averaging' is a mechanism designed to eliminate the risk of timing the markets in an ill-informed manner, which can result in losses. As an investor, you are relieved of decision-making in terms of market entry and exit. All you do is, pay a fixed sum of money at regular intervals, across a pre-decided period of time.

The regular instalments ensure that you buy more fund units when the unit prices are low and less when the prices are higher. This way, you can tide over the volatility in prices over a long time period.

A sample illustration of the Rupee Cost Averaging Mechanism is given below:

According to the table, had the investor invested Rs 50,000 in one installation, he would have bought 2500 shares at Rs 20 each. However, by investing only Rs 5000 per month, the investor benefits by obtaining 2600 shares at an average cost of Rs 19.6 per share.

Advantages of Rupee Cost Averaging

• Reduced average cost by exploiting market fall
• More number of shares for the same amount of money
• Affordable monthly installments
• Gradual investments that avoid the pitfalls of market fluctuations

Rupee Cost Averaging and Insurance

A unit linked plan, based on rupee cost averaging, provides the dual benefits of obtaining an insurance cover along with creating wealth over a period of time.

Risk appetite is the ability to take certain risks in order to make gains. Each individual has a unique risk appetite when it comes to investing money.
Factors affecting a person's risk appetite:
The risk appetite of an individual depends on various factors like

• Age
• Life stage
• Number of dependents
• Nature of job / business
• Financial responsibilities etc.

For instance a person nearing his retirement may have a lower risk appetite than a young person, though both of them may have a similar job profile and may draw a similar salary.
Before investing, it is advisable to determine your risk profile and then opt for a suitable fund.

Risk Profile of Funds:
As a thumb rule the fund with maximum exposure to equities is the most risky of the funds while the fund with maximum exposure to money market securities is the least risky. Similarly as risk and return go hand in hand, equities have the potential to provide the best returns among various asset classes while money market instruments give the lower returns but with negligible risk. Also, among equity funds large-cap funds are less risky than mid-cap funds.

Fund Investments:
An investor may choose to alter his fund investments, depending on whether his risk profile has undergone a significant change or market conditions have altered.
Many a times, an investor with high risk appetite may opt for low risk funds if he perceives that the market conditions are not suitable for investing in equities. In such a case, he may shift from a low risk fund to a high risk fund at a later stage, when he is convinced about the performance of the equity markets.

Investing in Aviva's funds:
We offer a wide spectrum of funds with different asset allocations, to meet different risk-return needs of investors. The matrix below may be used as a guide while choosing the right investment option as per one's risk profile and return expectation.

Risk Return Matrix